Week in FX Asia -Yen Fall a Life Saver For Exporters, But What About Debt Holders?

At the moment Yen seems only interested in one direction and that is the weaker ‘route.’ Since last September the ‘mighty dollar’ has taken one course of action against the currency from the rising sun, and that’s the ‘northbound appreciation highway.’ During this period, this one directional outright trade has seen the JPY depreciate just over +15%!

Any sustained and material domestic currency weakness tends to appease the country’s exporters. But what about the ‘debt holder,’ the vast majority of JGB owners, who tend to be other financial institutions or the BoJ itself?

A depreciating Yen has the potential of pushing JGB yields much higher, forcing their owners to be staring down at huge potential unrealized losses. On the other hand, Japanese equity holders and any companies with domestic production plants must be happy.

It seems that the Abe Yen depreciating revolution has yet to stare down “the black spot.” That’s when future losses become materialized!

 

WEEK AHEAD

  • EUR German Consumer Price Index
  • GBP Consumer Price Index
  • USD Producer Price Index
  • EUR Euro-zone Consumer Price Index
  • USD U.S. Federal Reserve Releases Beige Book
  • EUR ECB Publishes Monthly Report
  • AUD Unemployment Rate
  • NZD Consumer Prices Index (YoY)
  • CNY Real GDP
  • USD U. of Michigan Confidence

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell