There’s lots of attention on the Euro today as it nears a 19-year low, with EUR/USD falling below parity today and the chances are that it will stay there for a period this time, after climbing back up last time. But the big story of the FX year in my mind is the Yen. We’re witnessing a change from a +20-year regime in the forex market of the JPY as the predominant safe haven.

USD/JPY is up for five straight days but I really want to focus on the past two days. In each of those, global equities have been battered but the pair rose anyway, which means that the JPY has been declining as the sentiment turned negative in financial markets. Just a few years ago that would have been unthinkable.

Now it has become routine. The dollar has supplanted the Yen as the global safe haven currency of choice. A big part of that is monetary divergence as the BOJ sticks to yield curve control but there’s always been positive carry in the dollar. If this regime continues to expand it raises the risks of a major dollar overshoot across the board.   

USD/JPY Daily Chart – Breaking Above the 50 SMA

USD/JPY gaining as the Yen declines, despite the negative risk sentiment in markets