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Japanese Yen Soars As Investors Flee to Safe-Haven Assets

March 9, 2020 at 16:48 by Andrew Moran

The Japanese yen is soaring against multiple currency rivals to kick off the trading week as investors are fleeing to traditional safe-haven assets amid the market crash. With the major leading stock indexes worldwide posting steep losses, traders are buying the yen, despite the disappointing economic data. Will the yen be the best performing currency in the first quarter?

While Covid-19 is still lingering in the background, the main headline at the opening bell was crude oil.

The Organization of Petroleum-Exporting Countries (OPEC) had proposed to slash production by as much as 1.5 million barrels per day (bpd) to weather falling demand. Russia rejected the proposal during a meeting in Vienna. When talks broke down, Saudi Arabia announced massive discounts to its official selling prices for April and increase output to more than 10 million bpd. As a result, many analysts are forecasting that crude prices could crash $20 by early as next month.

The breakdown in negotiations triggered a huge market crash.

On Monday, fears over the coronavirus outbreak and a global oil price war triggered a historic selloff. In the US, the Dow Jones crashed 1,800 points, the S&P 500 fell 7%, and the Nasdaq Composite Index dropped 6.9%. In Asian markets, the Nikkei fell 5%, the Shanghai Composite Index plunged more than 3%, and the Hang Seng tumbled 3.2%. In Europe, the German Dax plunged 751 points, while the London FTSE declined 6.3%.

May Brent crude futures cratered $8.14, or 17.98%, to $37.13 per barrel.

It became so bad on the New York Stock Exchange that the circuit breaker was triggered, and trading temporarily halted for 15 minutes.

The events produced an influx of traders into the yen, even with poor economic readings. The final gross domestic product (GDP) growth rate reading in the fourth quarter was -1.8%, higher than market projections of -1.6%. The GDP growth annualized rate came in at -7.1% in the October-to-December period. The Eco Watchers Survey Outlook came in at 27.4 for February, down from 41.9 in January.

Last month, bank lending rose 2.1%, up from 1.9% in January.

Experts are warning that the data will be worse in the coming months as the local and global death toll and confirmed cases keep climbing. Tokyo recently urged local governments to prepare for an influx of patients flooding hospitals over Covid-19 as health authorities believe the virus could extend into 2021.

The USD/JPY currency pair tumbled 2.94% to 102.20, from an opening of 105.32, at 16:34 GMT on Monday. The EUR/JPY dropped 1.4% to 117.16, from an opening of 118.90.

If you have any questions, comments, or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

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