An exchange traded fund that tracks the movements of the Japanese yen versus the U.S. dollar has consolidated recently with investors favoring safer currencies. However, the strength of the yen has not gone unnoticed and policy makers are contemplating an intervention in the forex market.
Rydex CurrencyShares Japanese Yen Trust (NYSEArca: FXY) was up 0.3% at last check Monday. The fund has gained 3.5% over the past three months and 4.5% year-to-date.
In the Group of Seven meeting, Japanese Finance Minster Jun Azumi stated officials would “closely monitor developments” and “will take bold actions, especially against speculative trading,” reports Sean Hyman for Newsmax.
Other members did not object to Azumi’s promise, and some said that they would join the Bank of Japan by dumping yen and buying U.S. dollars.
The Japanese yen jumped to a 10-year high against the European euro and maintained its strength against the U.S. dollar, reports Gertrude Chavez-Dreyfuss for Reuters.
The Japanese yen usually performs well during times of economic and financial distress because the island nation has maintained a current account surplus, which makes it less reliant on overseas borrowing. The Swiss franc has also been perceived as a safe-haven for the same reason, but demand has waned after the Swiss central bank imposed a price ceiling on the franc.
“One of the safe havens was taken away – the Swiss franc – and the yen is one of the remaining safe havens,” commented Carl Forcheski, a director on the corporate currency sales desk at Societe Generale, report Catarina Saraiva and Paul Dobson for Bloomberg.
“Euro-yen is reflecting that euro-Swiss is taken out of the equation at the moment. I wouldn’t be surprised to see the yen strengthen a little bit more,” Forcheski added.
Rydex CurrencyShares Japanese Yen Trust
For more information on the yen currency, visit our Japanese yen category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.