Japanese Yen ETFs Tumble as Dollar Breaks 100 Yen

May 9th at 3:09pm by Tom Lydon

The Japanese yen exchange traded fund is at a new 52-week low as the currency weakens beyond the 100 per U.S. dollar psychological mark for the first time since 2009.

The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) was down 1.5% late Thursday. Year-to-date, FXY has declined 12.5% as the Bank of Japan enacted a more aggressive monetary policy and set a 2% inflation target.

The USD to Japanese yen exchange rate rose 1.7% Thursday to $100.67/¥. The last time the yen broke the $100 level was on April 14, 2009.

Japan’s currency depreciated 3.5% since the start of April after Bank of Japan Governor Haruhiko Kuroda unexpectedly announced the central bank’s decision to double monthly bond purchases and buy long-term debt in a bid to hit the 2% inflation goal, reports Kevin Buckland for Bloomberg.

Economists expected a 5.2 trillion yen monthly bond purchase program, but Kuroda came out with a 7 trillion, or $700 billion, plan.

The BOJ aggressive move is the latest bid to jumpstart a stagnating economy suffering from incessant deflationary pressures.

“What creates Japan’s deflation is the aging of society,” Hideo Kumano, chief economist at Dai-ichi Life Research Institute Inc., said in the article. “Robust economic growth and business opportunities that provide future income are needed to end deflation. Even if the central bank raises the flag of inflation, whether people will follow it is a different matter.”

Amid grumblings of a currency war, the G-20 endorsed the BOJ’s stimulus measures, supporting the devaluation of the yen as long as the focus was on improving domestic demand. [Japanese Yen, ETF Depreciates After G-20 OKs Aggressive Easing]

Investors have taken advantage of the sliding yen by shorting yen assets, including FXY. More aggressive traders have also looked at the ProShares UltraShort Yen ETF (NYSEArca: YCS), which has gained 27.2% year-to-date. As a leveraged inverse fund, YCS is a trading vehicle rather than a long-term investment. It can be extremely volatile. [ETFs to Short the Yen Like Mark Cuban]

CurrencyShares Japanese Yen Trust

For more information on the yen, visit our Japanese yen category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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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