[奥兰多（美国佛罗里达州）15 日路透社]- If the world is in crisis, few assets are touted as a “safe haven” like the yen.
However, in the weeks after Russia invaded Ukraine on February 24, the yen continued to fall against the dollar and fell to its lowest level in five years. This time things seem to be different.
The reasons for the yen’s strength during international financial market turmoil are lower interest rates and commodity prices, as well as Japan’s huge current account surplus, none of which currently exists. To make matters worse, these factors are moving in opposite directions. Global interest rates rose, energy and other commodity prices surged after the Fed observed rate hikes, and Japan’s current account surplus remained modest and was disappearing.
HSBC’s team of foreign exchange analysts has finally raised the white flag, acknowledging that they underestimated the nature of the shock to markets following the Ukraine invasion. Instead of the “typical risk aversion” that pushes up counter-cyclical currencies like the Japanese yen, there is a phenomenon in which “currency of commodity exporters has mostly outperformed currencies of net commodity importers.” Because it is. Of course, few countries in the world are as dependent on imported energy as Japan.
Most of Japan’s primary energy needs are covered by crude oil, more than 90% of which is imported from the Middle East. Japan is also one of the world’s leading importers of liquefied natural gas (LNG), which accounts for about 25% of the energy mix.
Crude prices soared from North Sea Brent to as high as $140 earlier this month, compared with around $90 a barrel before the invasion of Ukraine. Spot LNG prices in Asia are about 20 times higher than they were before the coronavirus pandemic.
Japan’s terms of trade deteriorated sharply with these energy market trends. The current account surplus, which has barely stopped for decades, is now in danger of turning into a deficit due to the appreciation of the yen.
Deutsche Bank macro strategist Alan Ruskin said, “This is an unusual crisis. U.S. interest rates and oil prices continue to rise, and the terms of trade are moving in a direction that is unfavorable for Japan.”
Ruskin has watched the foreign exchange market for 40 years. During this period, there were major shocks such as the first Gulf War in 1990, the Russian financial crisis in 1998 and the LTCM collapse crisis, the global financial crisis in 2007-09, and the 2020 new crown virus pandemic. Bring a strong yen.
That’s because domestic investors have suddenly recycled some of their accumulated overseas assets against the backdrop of Japan’s huge “peacetime” current account surplus. The “local bias” of returning the world’s largest overseas investment fund to Japan is powerful.
The strongest appreciation of the yen occurred in October 1998. Two months ago in August, Russia stunned the world with a sudden default on its ruble-denominated debt, leading to a crisis that plunged US hedge fund LTCM into crisis a month later. At the time, the yen was up 7% against the dollar on October 7 and was up 16% for the week.
And now, with a Russian default looming again, the yen’s status as a safe haven is overshadowed.
Whenever the market is under major stress or geopolitical tensions, the U.S.-Japan interest rate differential always affects the appreciation of the yen. That’s because yields on U.S. government bonds have fallen faster than in Japan.
However, the crisis has recently accelerated the rise in U.S. Treasury yields. Inflation in the U.S. is close to 8%, the highest growth rate in 40 years. The Fed has taken a hawkish stance on inflation. The market expects the Fed to accelerate the pace of interest rate hikes.
At the same time, Stephen Englander, head of global foreign exchange strategy at Standard Chartered Bank and long-term observer of the foreign exchange market, said that the depreciation of the yen against the dollar reached 2.5% in less than three weeks, and I think the depreciation of the yen is resting. condition.
Still, he said the yen is in a state of equanimity because three main factors affecting the currency’s value, such as the interest rate differential between Japan and the U.S., its attractiveness as a safe asset and potential economic growth, are all against the yen. The analysis concluded that the reservation may be temporary. He said: “The yen is currently expensive as a safe haven. If all three factors are at play for a strong dollar/weak yen, and you add the fourth factor, the energy shock, then the yen is bullish. I think there are very There are few reasons for this.
(I am a columnist for Reuters. This column is based on my personal opinion.)
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