Japanese Yen Gains As The Global Economy Plunges Into More Uncertainty Causing Serious Slip To Aussie Dollar And KIWI
The global has been affected negatively by the increasing trade tensions mainly fueled by situations such as the U.S-China trade war. As a result, major currencies have turned bearish, but it is free real estate for haven currencies such as the Japanese Yen to grow.
The Japanese Yen has grown stronger because it is currently more appealing to traders. Safe haven currencies tend to be immune to economic risks.
Investors know this, and thus, currencies such as the Yen often gain when other major currencies turn bearish because investors adopt safe-haven currencies to shield themselves from losses.
The Yen peaked at 105.94 on Wednesday before dropping to 105.92 which was the lowest price point for the currency pair during the session.
The Bearish performance was likely caused by the tension between China and the U.S, thus pushing down the value of the dollar.
"The yen's appreciation versus the dollar may have slowed for now, but it stands to keep gaining in the longer term," stated Junichi Ishikawa, the chief forex strategist at Tokyo's IG Securities.
Major currencies including the US dollar have taken a hit this week as central banks pulled the trigger on heavy interest rate cuts. There is a high likelihood of more rate cuts to come.
Numerous central banks from different global regions have slashed rates to shield their economies from the effects of the decelerating global economic growth.
Consequently, some currencies such as the Australian Dollar and the New Zealand dollar dropped by huge margins on Wednesday. The decline happened after the Reserve Bank of New Zealand slashed its interest rate by a bigger margin than anticipated.
Central Banks might not be done with rate cuts
The RBNZ also entertained the possibility of more rate cuts in the future, including negative rates. Major currencies, including the U.S dollar and the Euro will likely continue to feel the pressure courtesy of the rising monetary easing expectations that are happening globally.
The New Zealand dollar fell to $0.6378, during Wednesday's trading session, thus reaching its lowest point that it has reached over the past three and a half years. The Australian Dollar also registered a major decline after reaching $0.6677. The last time that the currency traded that low was in March 2009.
The trade uncertainties have also negatively affected Treasury yields that were pegged on the USD/JPY as the idea of more rate cuts continues to float around. This led to the buildup of speculation with regards to the impact on currencies, especially on the US dollar. These factors pushed down the 10-year U.S.
Treasury yields 1.595% on Wednesday, thus reaching its lowest level within the last three years.
The US dollar index only dropped by 0.1%, which means that it managed to hold its position strong on Wednesday despite the economic headwinds. Its price ranged at around 97.537, which was noticeably lower than the 98.932 it achieved last week. It fell to the current levels due to the expectations of rate cuts.