A strong earthquake hit Japan, prompting frazzled traders to dump Japan’s stocks and currency. This could be an additional blow to Japanese yen exchange traded funds (ETFs) as the U.S. dollar has been gaining ground against the currency.
A 8.8 magnitude earthquake struck northeast of Tokyo at a depth of six miles off the eastern coast, damaging Tokyo and sparking a 6 meter-high tsunami warning along the island’s northeastern coast, according to The Wall Street Journal.
A tsunami watch is effective for Indonesia, the Philippines, Taiwan, Hawaii, Russian and the Marianas. [Emerging Market ETF Sell-Off Affecting Emerging Markets?]
The Japanese yen, Tokyo stocks and Japanese government bond yields fell as panicked traders assessed the situation. The Nikkei Stock Average dropped 1.7% on closing and the dollar strengthened to $83.20 yen from $82.80 yen. The Japanese currency fell versus all 16 of its most-traded counterparts, write Candice Zachariahs and Ron Harui for Bloomberg.
Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, commented that “this is obviously bad news and the inclination is to sell yen.” He further remarked that “the yen is a safe haven itself and the fact that Japan runs a current-account surplus means there’s a possibility that, if this is very serious, Japan might keep more of its money at home.”
For more information on the Japanese yen, visit our Japanese yen category.
- ProShares UltraShort Yen (NYSEArca: YCS)
- Rydex CurrencyShares Japanese Yen Trust (NYSEArca: FXY)
- WisdomTree Dreyfus Japanese Yen Fund (NYSEArca: JYF)
- PowerShares DB US Dollar Bullish Fund (NYSEArca: UUP)
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
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.