Yen stands tall as growth concerns curb risk appetite

A Japan Yen note is seen in this illustration photo taken - REUTERS

London (Reuters): The Japanese yen rose sharply across the board on Wednesday as investors grew cautious on the first trading day of 2019 about spluttering global growth and volatile equity markets.

In a bleak start to the year, the mood was wary in currency markets with perceived riskier currencies such as the Australian dollar and the euro down across the board while the yen climbed to a seven-month high versus the dollar.

The yen often benefits during geopolitical or financial stress as Japan is the world’s biggest creditor nation and sees inflows during periods of heightened global market volatility.

Japan’s currency has strengthened for three straight weeks and was among the few gainers in 2018 against a resurgent dollar. In the last four days alone, it has gained 2.2%.

“If you embrace the idea of the US slowdown gathering momentum and the Federal Reserve cutting rates, then the yen is the currency for you,” said Kit Juckes, Chief FX Strategist at Societe Generale. As expectations for more US rate increases have gradually been whittled away in markets in recent weeks, financial markets now expect no rate hikes this year and traders are focusing on the dollar’s vulnerabilities.