Reuters reports that the Yen, which has long been considered a safe-haven in the currency market when other currencies’ home regions are suffering economic downturns or political problems, finished 0.15 percent higher versus the dollar yesterday. This put it at 109.79 against the dollar after it had touched 109.70, this being its strongest position since February 8.
Japan’s currency also rose 0.15 percent versus the Euro, finishing at 124.035 while it also had gains against Australia’s dollar. It finished 0.2 percent stronger versus the Australian dollar.
The main driver of this rise has been the weak manufacturing data from both the US and Germany that was released on Friday. These results, particularly Germany’s which are far weaker than what most economists had anticipated, have led the markets in fear of a global economic downturn.
Japan’s economic data has not been without its own problems, but it has not been as bad in the eyes of the market as the US and European data. The president of FPG Securities, Koji Fukaya, says that while the bad economic data coming out at the moment should not come as a surprise. He adds that the hopes of an improvement in Chinese/American trade relations have swept the early indicators of underperforming under the carpet. He finished that the rise of the yen is tied to “excessive expectation being curtailed”. His views are that the Yen is only gaining against its peers because the numbers are not as bad as its counterparts – even though they are lower than expected.
The economic data was not the only reason the Yen has been going strong. The US Dollar had already taken a beating by Friday when the spread between 3-month T-Bills and 10-year notes had inverted. This is the first time this has happened since 2007. An inverted yield curve has been known to be the forerunner of a recession when looking at the historical data.
Political turmoil not as influential
The currency markets did not, however, shake when Mueller released his report to the US Congress. The Mueller Report showed that US President Donal Trump had not colluded with the Russians during the 2016 presidential election.
There was not enough evidence to charge the president with obstruction of justice or with anything else, however, there was little to no effect on the currency market following this news.
Stocks have been receding across the more influential markets – Asian stocks have been tracking their European and US counterparts in falling due to the poor economic data from two of the world’s economic powerhouses.
Indeed, Germany’s results have gotten the market worried the market with the results sending stocks heavily into the red and Germany’s 10-year bonds verging on the precipice of 0%.