Japanese Yen Sought As Safe Haven?

The yen is a classic example.  The idea is that certain currencies – the stronger ones of the lot in reality – will fare better than others during a recession because people flock to them for safety.  The yen falls into this category, which is why it seems to be doing better at the moment.

Take the mid point from the month of March for example.  Against the Euro the yen was bagging 0.00787 on the 15th.  It fell to 0.00770 by the end of that week, before dropping from the 23rd onwards.  The 23rd saw an exchange rate of 0.00762, while by the 16th that had gone down to 0.00748.  This shows that no currency is immune to highs and lows in the currency markets, but as we will see the yen has bounced back considerably since then.

A high point of 0.00781 was reached on the 30th, before sinking down to settle on 0.00745 on the 3rd April.  Ironically given the ‘safe haven’ nature of the yen, the exchange rate didn’t go in its favor after that.  Not for a while, anyway.  On the 6th April the figure you would have seen on your currency converter was 0.00735.  But it was then that things started to pick up somewhat.

The 8th April saw a closing figure of 0.00755, and once the Easter holidays were out of the way and things got back to normal, a raft of news stories were published online.  These referred to the fact that people do view the Japanese yen as a safer currency among the masses.  You can read such stories on credible websites including Bloomberg.com at this link, and Reuters.

But that doesn’t mean the yen has done well against every currency.  And one of the results we have seen recently is quite a surprise considering the relative weakness of the other part of the currency pairing.

The British pound has had tough times of late – and indeed those times stretch back into last year.  But on the 15th March the yen bagged 0.00725 British pounds, and had something of a rocky time from that point on.  By the 24th that had slipped back to 0.00693, although it did manage to creep back up to 0.00726 by the time the 30th rolled around.

At the time of writing though, the 1st April was the last time the yen managed to get into the 0.007 territory.  That was with a figure of 0.00703.  From then on it has dipped down slightly and on the 9th – the last day before Easter arrived – the figure was at 0.00679.

This might seem a bit strange given that the yen is generally viewed as being stronger than the British pound at the moment.  And things haven’t looked so good against the US dollar either, as April has taken hold.  An exchange rate of 0.00997 just before Easter is rather different from the figure of 0.01043 that was achieved on the 20th April.  The yen has slipped back slightly, but even though that has happened, it is still viewed quite positively by a lot of people.

The idea is that a lot of people think the worst is far from over when it comes to the global recession.  And even though the yen hasn’t had the best of times of late, it is still the case that the way people regard it on the whole can have a marked effect on its fate.

So even though it has slipped against some other currencies just recently, this is likely to be nothing more than a temporary dip in its fortunes.  We can expect the exchange rates to go up in its favor again very soon.

This is very understandable when you think about it.  The idea is that during times of uncertainty people want to buy the currencies that are the strongest of the lot.  You wouldn’t want to buy a currency that you have no confidence in – such as the Zimbabwean dollar for example.  This is a currency that has now been suspended because of its dire situation.

So keep an eye on the Japanese yen in the coming weeks.  The chances are good that it will remain among the strongest of the lot.