Why do traders prefer Japanese yen?

Why do traders prefer Japanese yen?

2020-05-18 • Dikemaskini

You may not have noticed that but the Japanese yen rose every month this year. It grew more than other currencies of the Group-of-10 and became a top currency. How could it have beaten the powerful US dollar? Let’s see.

Weak US dollar

Both the US dollar and the Japanese yen are safe-haven currencies. That’s why they are so attractive for investors amid the coronavirus pandemic. However, the Fed’s monetary easing program flooded the market with the US dollar, that undermined its number one position. As a result, the yen has an advantage. 1:0 for the Japanese yen.

US-China tensions

2020 is a year of the presidential election in the USA. That’s why Donald Trump may be really hard on China, that can switch the market sentiment to a risk-off mode. As Japan doesn’t participate in these tensions directly, it can gain. 2:0 for the Japanese yen.

Possible negative rates in US

Some analysts believe that the USA may use negative rates in the next year. The Fed’s chairman is strictly against to impose it now, but who knows, he can change his mind in the future. Nevertheless, even the slight possibility might play against the greenback. The score is 3:0 for the yen.

Dark prognosis for the US economy

Non-Japanese investors are more focused on the US data rather than the Japanese. There is a lot more news about the future US recession and prolonged downturn. So, the overall opinion about the US future is seemed worse than the Japanese. 4:0.

Technical outlook

We can easily notice the downward trend on the USD/JPY chart. The price can soon fall down to the 106.05 mark and after that it can go even deeper to 105.3 within a shallow bear channel. Resistance levels are 108.2 and 109.2.

The final score is 5:0 for the Japanese yen!

USDJPYDaily2.png

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