Japanese yen holds on to gains
The Japanese yen (JYN) managed to hold on to its gains from the past two weeks despite the increase in risk appetite. The Japanese yen is considered a safe haven in times of market sell-offs and had seen increased demand during the recent market correction. The surprise was that the yen held on to its gains during the market rebound. For the week ending February 16, the Japanese yen (FXY) closed at 106.3 against the US dollar (UUP), appreciating by 2.3%. Japanese equity markets (EWJ) rose in response to the global market rebound with the Nikkei 225 (JPXN) posting a weekly gain of 1.6% in the previous week after an 8.1% decline for the week ending February 9.
Speculators decreased bearish bets on the yen
Japanese yen (YCL) speculators increased their net short positions on the yen, as per the Chicago Futures Trading Commission’s latest Commitment of Traders (or COT) report, which was released on February 16. As of Tuesday, February 13, Japanese yen speculators had a net short position of 115,509 contracts as compared to 112,876 short contracts in the previous week. The decrease in risk aversion across global markets could force recent backers of the yen to book profits.
Week ahead for the Japanese yen
If the market rebound continues this week, there is a high probability that the Japanese yen could give up its recent gains. The Japanese economy is expected to receive continued support from its central bank, which should limit any steep increase in its currency’s value. Japanese exports and manufacturing reports are due to come out this week. Foreign demand, aided by global economic growth has been the key driver of the Japanese economy, and this week’s data could support this trend.