Yen to Strengthen as Greenback Loses Safety Allure, TD Says

[Enivid]

The yen may reverse this year’s drop against the U.S. dollar and the British pound as Japan’s currency takes over from the greenback as the best refuge from the global financial crisis, TD Securities said.

Investors may benefit by adding to bets against the dollar, with the U.S. currency expected to reach 92 yen by year-end, wrote analysts led by Stephen Koukoulas, head of global foreign exchange and fixed income at TD Securities in London. TD also recommended selling the pound against the yen, targeting a slide in the British currency to 139 yen.

“The U.S. dollar’s cozy relationship with risk aversion is at risk itself,” the analysts wrote. The yen “has a chance at establishing its credentials as the refuge of choice in time of market uncertainty.”

The yen is this year’s worst-performer of the 16 most- traded currencies tracked by Bloomberg, as optimism that the global recession will abate encouraged investors to seek higher- yielding assets. The Bank of Japan cut its benchmark interest rate to 0.1 percent in December.

The U.S. dollar ended three days of losses, rising 0.3 percent to 95.55 yen as of 10:17 a.m. in Tokyo and the pound traded at 144.69 yen. Japan’s currency weakened 5.1 percent against the dollar and 8.5 percent versus sterling this year.

From Bloomberg News.

[JEAN]

The traders believe the yen's surge is due to a massive buying of the Japanese currency as a safe haven.
On the other hand, the downwards trend of the pair is influenced also by the decline of the US bonds yields and the buying of Japanese assets by local investors.