Investors Keep Selling the JPY Despite Falling to the Lowest Since 2002 vs. the US Dollar

FXOpen

One of the big stories in the FX market in 2022 is the spectacular drop of the Japanese yen (JPY). Since March, it has depreciated against all its peers to reach the weakest levels vs. the US dollar since 2002.

Interestingly enough, the selloff comes when investors had all the reasons to buy the Japanese currency – not to sell it. Historically, the JPY acted as a safe-haven currency.

Effectively, it means that traders bought the JPY and sold US equities in times of uncertainty. Well, one did happen – US stocks are down by about -20% or more, depending on the sector. But the JPY did the opposite.

н

BOJ’s Measures Put Pressure on the Yen

The trigger of the yen’s weakness was the Bank of Japan’s policy. It continues to suppress bond yields, making JGBs or Japanese Government Bonds less attractive – and the yen too.

This is a central bank that diverges from other major central banks in the sense that it keeps easing conditions while others have started to tighten. The Federal Reserve of the United States is the perfect example, doing exactly the opposite of what the Bank of Japan is doing. Hence, the yen reached the weakest level in more than two decades against the US dollar.

But before blaming it all on the Bank of Japan, one thing should ring a bell for FX traders. If it was only the JPY declining the way it did, then the Bank of Japan was the sole reason for it.

Except it wasn’t.

The other safe-haven currency, the Swiss franc, dropped even more against the US dollar. The USD/CHF exchange rate rose above parity for the first time in many years as investors ran from the so-called safe-haven currencies and bought the US dollar – the world’s reserve currency.

So, what comes next?

Because of the Swiss franc is dropping in a similar or even more aggressive fashion, it means that the price action in the FX market is driven by the US dollar and the Fed and not by the Bank of Japan and the yen. Hence, look for the trend to continue as the move may have just started.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Weekly Market Wrap With Gary Thomson: US500, USD, US Inflation, USD/JPY Australian Dollar Volatility Ends in Lull Ahead Of US Data Weekly Market Wrap With Gary Thomson: CHF, CAD, GOLD, TSLA Weekly Market Wrap With Gary Thomson: CAC 40, AUD, OIL, AMAZON The US Continues to Trump the Euro Economy on Key Metrics, But What Is Next?

Latest articles

Forex Analysis

US Dollar Shows Record Weekly Gain Since Mid-January

The US dollar strengthened on Friday ahead of a series of highly anticipated central bank meetings next week, including the US Federal Reserve. The dollar rose 1.3% for the week, its biggest gain since mid-January, after a mixed batch

Shares

Tesla Stock Hits a Low Point as Musk Sues Openai - Is This Year a Total Write-Off?

Occasionally during the course of industrial progress, there is a maverick; a voice that is known for continual disruption and maintaining a high-profile position whilst engaging in such disruption. The figure of this decade is Elon Musk, a self-starter whose

Trader’s Tools

Analytical Forecasts: How Much AAPL Stock May Cost in the Next 10 Years

In today’s tech landscape, Apple Inc. has consistently been at the forefront, shaping the future with its innovative products and services. As investors and enthusiasts alike ponder the future value of Apple stock, particularly looking ahead to the next

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65.68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.