Weekly Update: What's Making Markets Nervous?

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Part 7
Weekly Update: What's Making Markets Nervous? PART 7 OF 7

Why Did Japanese Yen Appreciate Last Week?

Japanese yen gained from dollar’s loss

The Japanese yen (JYN) managed a positive close last week after three weeks of continuous falls. For the week ending November 10, the Japanese yen (FXY) closed at 113.5 against the US dollar (UUP), a 0.48% appreciation. Economic fundamentals point towards further depreciation of the yen, but last week, the US dollar’s losses helped the recovery of the yen.

Japanese equity markets (EWJ) posted their ninth consecutive positive weekly close with the Nikkei 225 (JPXN) posting a weekly gain of 0.63% for the week ending November 10. A reduction in the optimism arising out of the US tax reform uncertainty stalled the global equity rally.

Why Did Japanese Yen Appreciate Last Week?

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Speculators increased bearish bets on the yen          

The Japanese yen (YCL) speculators increased their net short positions in the yen, according to the latest Commitment of Traders report released on November 13 by the Chicago Futures Trading Commission (or CFTC). As of November 7, the total net speculative short positions rose to 127,848 contracts from 118,869 contracts. US tax reform uncertainty came to light after November 7, and that impact on speculator positions could be seen in next week’s positioning data.

Week ahead for the Japanese yen

This week in Japan, third quarter GDP and national account data are scheduled to be reported. Exports are likely to improve, as demand from developed countries has been increasing recently. The increased demand is a positive development for Japan, but domestic demand continues to be weak. If the overall global sentiment improves, we can expect the Japanese yen to return to weakness. Otherwise, further appreciation in the currency can be expected this week.


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