April 25 (Reuters) – During March’s turmoil, Japan’s yen barely rose and the failure to do so suggests the only remaining currency undermined by a negative interest rate will drop, and that fall could see yen reach a record low this year.
The perception USD/JPY gave when falling from 137.90 on March 8 to 129.65 during the time of the collapse of Silicon Valley Bank was misleading, with yen’s trade-weighted value rising just 0.38% in March as a whole.
Bets on yen falling have continued and most of these are likely carry trades and therefore yen sales to fund investments in higher yielding currencies, unaffected by the brief USD/JPY drop.
Since then, Bank of Japan policymakers have stated an intention to pursue super easy policy, maintaining yield curve control. With equities soaring, volatility sinking and USD/JPY rebounding – perhaps a short squeeze of those who bet it would fall due to the old correlation with yen as safe asset – there is cause to think yen could fall much further.
The next long term target for yen – which hit a more than 5 decade low before intervention last year – suggests a 10 percent decline to a record low.
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)