JPY: Why won’t it fall? – Rabobank

By FXStreet Jane Foley, Research Analyst at Rabobank, suggests that the rebound in risk appetite since the middle of February has allowed the DJIA to recoup all of the losses registered at the start of the year.

Key Quotes

“The DAX has recovered around 73% of its fall but by contrast the Nikkei 225 has only covered 50%. The simplest explanation for the underperformance of Japanese stocks is the continued strength of the JPY. However, it is notable that the JPY has not weakened over the past month as stock markets and risky assets have recovered. Despite the improvement in general levels of risk appetite in recent weeks and the BoJ’s announcement of negative interest rates on January 29, the JPY has proved reluctant to relinquish its safe haven inflows.

In addition to the JPY, Japanese bonds have also been in demand. The more dovish than expected tone of the Fed this week had the impact of depressing bond yields in general. Heightened investor demand for JGBs has been reinforcing concerns about a lack of supply which were already prevalent given the BoJ’s enormous QQE plan. Speculation that QQE could be extended later this year has further enhanced fears of JGB supply shortages.

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Source:: FX Street