Yen Continues Decline
The Japanese yen continued to struggle on Monday as a solid start to the U.S. earnings season sent traders away from the safe-haven currency into the arms of riskier assets. As reported last week, analysts were concerned about the prospect of a weak earnings season, and the strong start has renewed trader optimism. The yen fell to 112.02 early in the trading session before firming slightly to trade at 111.90 as of 2:14 p.m. HK/SIN.
On Wall Street on Friday, U.S. stocks rallied and the S&P 500 hit its highest level in six months. It closed up 0.66 percent, while the NASDAQ closed 0.46 percent higher. The Dow Jones Industrial Average saw a 1.03 percent gain on Friday.
Also pressuring the yen was a renewed hope that the Chinese economy has hit its bottom and that the country’s economy will begin to rebound in the near term. Similarly, rumors that a trade deal between the U.S. and China is near has decreased demands for safe haven assets.
According to reports by Reuters and the Singapore Business Times, traders have boosted short positions on the yen for six consecutive weeks while speculators increased their long U.S. dollar position, pushing it to the highest level since December 2015. The increase in short yen positions came directly from signals that the country’s slowing economic growth could prompt the Bank of Japan to keep its easy monetary policy in place.
The yen has fallen close to 3 percent against the dollar since the start of the year. A breach of the March 5th low of 112.14 would see the currency at its yearly low, and traders worry that this level may not be far away.