Japanese Yen’s Spike to Record Against Dollar Lifts Currency ETFs

October 21st at 11:36am by John Spence

Exchange traded funds indexed to the movement of the Japanese yen against the dollar jumped Friday. The greenback dropped to a post-World War II low versus the yen, according to reports.

The dollar’s nosedive against the yen reflects “a lot of people have been trying to sell risk looking for Europe to disappoint and it’s just an ugly short squeeze devoid of any clear fundamental catalyst,” said Richard Franulovich, chief currency strategist at Westpac, in a MarketWatch report.

CurrencyShares Japanese Yen Trust (NYSEArca: FXY) was up nearly 1% at last check Friday. PowerShares DB US Dollar Index Bullish (NYSEArca: UUP), an ETF pegged to the dollar’s movements against a basket of currencies, shed almost 1%.

A weak Federal Reserve Beige Book report this week suggests the Fed may engage in further “quantitative easing,” Forbes reports, which would weaken the greenback.

Another round of QE by the central bank is “certainly a possibility” if there is a “bad economic shock,” Boston Fed President Eric Rosengren told CNBC earlier this week.

There was also speculation Friday that the dollar was weakening on expectations the U.S. could take a bigger role in supporting a Eurozone debt bailout. Currency debasement is a bullish factor driving gold.

The yen’s spike against the dollar Friday also triggered the usual talk that the Bank of Japan may intervene in currency markets to protect exporters.

Elsewhere in currency markets, euro ETFs strengthened before a key weekend summit. [Euro ETFs Jump]

CurrencyShares Japanese Yen Trust (NYSEArca: FXY)


Full disclosure: John Spence owns UUP.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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