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Huge Weakness In The Japanese Yen Explained



The weakness in the Japanese Yen (JPY) largely picked up much momentum in the session on Wednesday. Its underperformance was seen across the board.


A question amongst many has been why?


Well, it appears to me that markets are somewhat late responding to the awful Japanese GDP reading last weekend.


See blog and video recap here.


As a reminder, the report showed that Japan’s economy shrank at the fastest pace in almost six years. mA reading of -1.6% vs. expected -1.0% (previous 0.4%) was seen. It was the biggest fall since the second quarter of 2014.


Given the growth data readings, it is only right that investors would be reluctant to keep hold of any Japanese-based assets. Reports suggest that Japan is already in a recession and there are large Japanese funds who have been dumping local assets in favour of U.S. shares and gold.


In addition, there has been an improvement in market risk sentiment, largely thanks to China reporting a drop in new infections. China has also been acting with measures to prop up the economy; they lowered its benchmark lending rate, as the authorities move to lower financing costs for businesses.

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