Japanese Yen Fundamental Outlook: Is It Really all Gloom and Doom?
Japanese Yen First Quarter Recap – Dominant Downtrend Accelerated
As anticipated, the Japanese Yen started off the new year on a sour note. Taking a look at a majors-based index on the chart below, JPY weakened as much as 6 percent before cautiously stabilizing towards the tail end of March. The anti-risk currency remained fairly depressed despite some emergence of global stock market volatility, especially from the technology sector. This could spell some trouble for the Yen as traders further settle into 2021.
Majors-Based Japanese Yen Index Versus Wall Street Index
*Correlation does not imply causation,Source: TradingView
The Yen’s Relatively Dismal Yield and Why It Matters
A growing theme from the first quarter has been rising global growth and inflation expectations. Fairly swift vaccination rollouts in the United States, as well as President Joe Biden’s US$1.9 trillion Covid relief package, have been driving up longer-term Treasury yields. The markets are slowly pricing in that the Federal Reserve could begin hiking rates sooner than expected. Fed Funds Futures indicate that there is about a 60% chance of a hike by the end of 2022.