Yen strength retreats, as curiosity on next PM takes hold

Yen strength retreats, as curiosity on next PM takes hold

August 31, 2020

One new theme that took us by complete surprise late last week was the shocking bombshell that Shinzo Abe (Japan Prime Minister) and the longest-serving Premier in Japan’s history would be unexpectedly standing down from his position due to health concerns.


As a safe haven and backed by investors fiercely loyal towards it, this gave the Japanese Yen an unforeseen show of strength at the end of last week with the Yen appreciating against some of its major counterparts such as the USD, EUR, GBP and AUD.


Fast-forward to the beginning of the new week and this trend is subsiding with the same pairs all stronger against the Yen, USDJPY,AUDJPY, EURJPY as well as GBPJPY.


The USDJPY Daily Chart below shows that the USDJPY has today recovered close to half its sharp decline seen on Friday.

 

 

Taking a position on which direction the USDJPY is heading next though is not an easy stance to take, with only 51% of NAGA traders currently positive on the pair.

 

 

Perhaps the apprehension investors are holding towards how to position in the Yen is a reflection of investor pessimism over the rising infection rates that are being recorded worldwide in recent weeks, and also perhaps out of anxiety that some economies might be subject to resumed lockdown restrictions once again. Only time will tell on that one.

 

The other side of the coin could be that this is just a Japanese Yen story and investors really do not know how the upcoming changes in leadership will pan out.

 

Traditionally, Japan had developed a reputation as suffering from a lack of reform and innovation given the sharp emergence of economies around them and the changes in competitiveness that this brings to the landscape of trading in Asia.

 

Shinzo Abe, however, will carry a legacy and be remembered as someone who completely changed the perception of Japan. Its economy, like many others might still embrace challenges and obstacles however his leadership and policies encouraged a number of economic reforms that eventually led to the Japanese stock market doubling during his leadership.

 

Concerns over who might next take over a Japan PM, and whether they can continue an innovative and flexible policy framework approach during unprecedented times can potentially lead to further volatility in Yen pairs across the board.

 

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