The yen appreciates in response to US employment statistics: future prospects and investment strategies
The yen exchange rate hit a high for the first time in six months. I will explain the impact of US employment statistics, the factors behind the appreciation of the yen, future prospects, and recommended investment strategies.
✔️ Analysis of factors contributing to the appreciation of the yen
1. Weakness in US employment statistics
The US employment statistics for July fell far short of expectations, and concerns about the deterioration of the US economy grew. As a result, the movement to buy yen intensified.
✔️ Changes in US employment statistics
2. Observe interest rate cuts by the Federal Reserve
In the interest rate swap market, interest rate cuts of 0.25 points were completely factored in by the end of the year. For this reason, the trend of dollars being sold and yen bought is intensifying.
3. The Bank of Japan's stance on raising interest rates
The fact that the Bank of Japan continues to raise interest rates is a factor that increases the pressure to buy yen.
✔️ The impact of US employment statistics
After the US employment statistics were announced, the US stock market and government bond yields fell drastically. As a result, dollars were sold and yen was bought.
✔️ Changes in the US stock market and government bond yields
・Technical analysis Since the dollar-yen exchange rate fell below the trend line from the 2023/1 low, it is an environment where it is technically easy to sell dollars and buy yen.
✔️ Technical analysis of the dollar to yen exchange rate
・Future outlook
Short-term recoil The reaction that skyrocketed over the weekend before and actual demand for dollar purchases and yen sales on May 10th (every day) are expected. Therefore, there are situations where yen is temporarily sold back. Medium- to long-term yen appreciation trend As long as policy differences between the Bank of Japan and the Federal Reserve continue, there is a high possibility that the yen will continue to appreciate. In particular, as the Fed's interest rate cut observations intensify, it is expected that the buying pressure on yen will increase even more.
・Recommended strategies
Risk hedging We recommend that companies and investors with dollar-denominated assets take hedging measures in preparation for the risk of yen appreciation. For example, the use of exchange indices and hedging can be considered. Short-term trading We will also consider short-term dollar buy/yen selling positions aimed at a rebound in yen appreciation. However, since market volatility is high, careful trading is required.
✔️ Conclusions
The appreciation of the yen progressed as US employment statistics were weaker than expected. As long as policy differences between the Bank of Japan and the Federal Reserve continue, there is a high possibility that the yen appreciation trend will continue over the medium to long term. It is important to adjust risk hedging and short-term trading strategies as appropriate to respond to fluctuating markets.
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