The posted considerable gains in Monday trade. In the North American session, was trading at 109.50, down 0.47% on the day. Earlier in the day, the pair dropped as low as 109.05, its lowest level since May.
Yen shines as Covid fears spook markets
With the Delta Covid variant spreading ominously across the globe, investors are responding by fleeing to safety. The Japanese yen is a traditional safe-haven asset, and investors have been dumping risky assets such as the and snapping up yen. There are concerns that the Delta variant will have a sharp negative impact on global growth. This could accelerate the move away from risk and towards safe havens such as the yen.
In addition to the worsening Covid picture, tensions between the US and China have ratcheted higher, with telecom and cybersecurity issues being added to Hong Kong and human rights. If the rhetoric between the two giant economies gets harsher, risk appetite is likely to weaken even further.
The yen was slightly lower on Friday after the Bank of Japan revised lower its growth forecast for the current fiscal year to March. The BoJ stated that the economy would grow 3.8%, down from the previous estimate of 4.0%. The bank attributed the downgrade to the “impact of Covid-19”. At the same time, the BoJ revised upwards its inflation forecast for the current fiscal year to March to 0.6%, up from 0.1%, due to rising energy prices.
The BoJ also announced details of a climate change fund (green fund), taking a page from the ECB and Bank of England, which have already made climate change part of their monetary policy strategy.
USD/JPY Technical
- USD/JPY faces resistance at 110.62 and 111.15
- On the downside, there is support at 109.64. Below, we find support at 109.19
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
