Japanese Yen ETF: BOJ Governor Sees No Reason for Strong Currency

May 25th at 8:15am by Max Chen

The Japanese yen, along with the related exchange traded fund, is weakening, as the Bank of Japan  tells investors that they shouldn’t bet on further strength.

The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) was down 0.2% Friday. FXY dipped 0.2% over the past week, but the fund is still up 3.3% year-to-date. [Safe-Haven Demand Bolsters Yen ETF]

The Japanese yen was trading around 102 per U.S. dollar Friday and recently traded near a three-month high against the greenback.

BOJ governor Haruhiko Kuroda said that investors shouldn’t expect the yen to rise further even as the currency hovers around its highest level in months, the Wall Street Journal reports. He pointed out that the BOJ is only “half way” toward achieving its intended goal, so the central bank’s loose monetary policies will still remain for the time being.

Kuroda argues that with the U.S. economy “recovering very strongly” and strengthening faster than the Japanese economy, the yen should not appreciate against the USD.

“In this kind of situation, I don’t think it’s reasonable to expect the yen to appreciate against the dollar,” Kuroda said in the WSJ article.

The BOJ governor is confident that the central bank will hit its 2% inflation target, countering speculation that the core consumer price index will dip below its key 1.0% threshold.

“We don’t think it will go below 1%,” Kuroda said in the article. “It will stay around 1.25% for several months before starting to accelerate toward 2.0%.”

The governor also remains bullish on the Japanese economy, but the BOJ is ready to step in with further easing if the recovery begins to falter.

Year-to-date, the iShares MSCI Japan ETF (NYSEArca: EWJ) has dipped 7.1%. Meanwhile, hedged-equity ETFs have been underperforming this year due to the strengthen in the yen currency. The WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) declined 8.2% and db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) fell 10.5% year-to-date. [Japan ETFs Could Strengthen As Institutional Money Pours Into Equities]

CurrencyShares Japanese Yen Trust

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