Yen jumps as investors stay cautious amid volatile stock moves

NEW YORK (Reuters) – The Japanese yen jumped on Friday as investors sought protection against volatile stock moves, while the greenback dipped as stocks ended a dramatic week capped by large price swings.

The benchmark S&P 500 .SPX tested its 20-month low early in the week and was at the brink of bear market territory before the three main indexes roared back with their biggest daily surge in nearly a decade on Wednesday and a late rally on Thursday.

The yen gained despite soft domestic data and a decline in benchmark Japanese bond yields, which fell back into negative territory for the first time in more than a year.

“That suggests that there’s still demand for some insurance against extended volatility over the holiday period that’s keeping the yen better supported,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

The Japanese currency was last up 0.56 percent against the greenback at 110.37 yen. Another safe-haven currency, the Swiss franc CHF=, gained 0.26 percent at 0.9849.

“Markets are a bit more cautious on risk appetite, with the Japanese yen and the Swiss franc gaining,” said Lee Hardman, an FX strategist at MUFG in London.

The dollar index, a gauge of the greenback against a basket of six major currencies, fell 0.09 percent to 96.396 .DXY.

The U.S. currency has been hurt in recent weeks by rising expectations that the Federal Reserve will pause its tightening cycle sooner than expected, or potentially harm the U.S. economy with further interest rate increases.

A partial shutdown of the U.S. federal government, trade tensions between the United States and China and complications relating to Britain’s exit from the European Union are also keeping investors cautious.

“There’s still a lot of potential risk and uncertainty out there,” said Osborne.

Both chambers of the U.S. Congress convened for only a few minutes late on Thursday, but took no steps to end the partial federal government shutdown before adjourning until next week.

Reuters

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya