JPY Rises to 14 Month High on Safe Haven Flows

The yen rose on Tuesday to its highest against the dollar since November 2014, as a sell-off in global stocks and worries about Europe’s banking sector underpinned demand for safe-haven currencies.

The euro underperformed. Although it has enjoyed a good correlation with safe-haven assets and currencies since last August, it dropped to its lowest in nearly two weeks against the yen EURJPY=R and the Swiss franc.

Europe’s banking index .SX7P fell 1.3 percent and yields on southern European government bonds rose, keeping gains in the euro EUR= limited. The euro was also hurt in part by weak German industrial output, which fell unexpectedly in December ECONDE.

The yen, though, was in the limelight for the second day, gaining around 6 percent since the start of February against the dollar. The rise has undermined plans by the Bank of Japan, which wants to generate inflation through negative interest rates and a weaker currency.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza