USD is experiencing widespread weakness currently and it has prompted investors to unwind the bearish bets on the Yen, the major currency of Japan. This has triggered USD-Yen stops and has helped Yen to receive its biggest surge in the last 2 years against USD.
Yen has been able to reach the highest value in the last 7 weeks as the same has now crossed the key level at 98.85. It therefore breached the channel support at 98.03, as mentioned by the Chief Rates and Currencies Technical Analyst of Bank of America Corp., MacNeil Curry. The market was betting that USD would gain before this particular movement. Only on last week, the futures traders increased their bets that Yen will weaken against USD the most in last 6 years, however, the actual results are definitely different.
Curry added further than people are now unwinding out of USD-Yen and it has pretty much been exacerbated by the capitulation trade. As far as the current scenario is concerned, there is an uptrend for Yen; however, no one knows for how long it will last. On today, Yen has increased by 1.9% and the same is currently at 97.21 per USD. Yen has now touched the strongest level of the same since 16th April. Today’s intraday gain was the biggest for the currency since 17th March, 2011. Against Euro, Yen went ahead by 0.8% and the same is currently at 128.72 per Euro.
In the last year, Yen weakened by 22%, which was the most among the developed market currencies. Shinzo Abe tried his best to secure a 2% inflation rate and his efforts seemed to have paid off. The Bank of Japan in April decided to double the bond buying to drag the 3rd biggest economy in the world out of the deflation that the country has been experiencing for the last 15 years.
The Currency Strategist of Royal Bank of Scotland Group, Brian Daingerfield, stated that the weakness in USD-Yen pushed a positioning clear out which took place across the Group of 10 countries, as the cross took out the stops. Daingerfield added that the catalyst behind the broad based USD weakness was the USD-Yen breaking through some of the most important levels on the downside. Incidentally, stops are orders which are triggered when a currency reaches a particular pre-set level.