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USDJPY Outlook: Dollar Preferred to Yen by Risk-Averse Investors

USDJPY Outlook: Dollar Preferred to Yen by Risk-Averse Investors

2019-01-23 09:00:00
Martin Essex, MSTA, Analyst
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USDJPY price, news and analysis:

  • The USD, JPY, CHF and gold are the usual beneficiaries when investors seek to reduce their risks.
  • However, for now, the Japanese Yen is underperforming the US Dollar as concerns increase about the state of the Japanese economy, and that’s a trend that could persist.

Japanese Yen underperforming

USDJPY is continuing to advance as concerns about the Japanese economy outweigh the Yen’s safe-haven status, and that is a trend that may well continue short-term. As the chart below shows, the pair has been climbing since the start of the year and there is no sign yet of its advance being halted.

USDJPY Price Chart, Hourly Timeframe (January 2-23, 2019)

Latest USDJPY price chart.

Chart by IG (You can click on it for a larger image)

As has been the case for a while now, market sentiment is weak due to several factors:

  • The US-China trade dispute is still a concern. The Financial Times and CNBC both reported Tuesday afternoon that Washington had canceled a preliminary meeting set for this week ahead of Chinese Vice Premier Lius visit. The White House denied the reports but that did little to restore confidence.
  • Global economic growth is spluttering after weak data from the US, China, Germany and elsewhere despite continuing efforts by China to stimulate demand.
  • The partial US government shutdown continues, with no resolution in sight despite signs that the US Senate may be shifting towards a more conciliatory position.
  • Brexit remains a background concern on fears the UK will leave the EU without a deal even though an extension of the approaching deadline remains possible.

However, the Japanese Yen is underperforming the US Dollar, with sentiment undermined by the latest news from the Bank of Japan. It cut its inflation forecasts Wednesday and warned of risks to the economy from faltering global demand.

This means no imminent exit from its ultra-easy monetary policy and there is even talk of a Japanese recession. Investors are therefore likely to continue to shun the Yen despite its long-time status as a haven for worried traders.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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