Yen Gains Across The Board On Carry Fears

The Japanese yen was supported throughout the New York session following overnight news that interest rates may well be increased again in the Chinese economy. Although, the two economies are very separated in economic and governmental policy, they are intertwined on the basis that when risk aversion hits, Chinese markets trend lower and yen carry trades are unwound.

Similar situations have emerged throughout the year, with the most recent one being last month, May 29th, when officials tripled the stamp tax on stock transactions. Stock markets in Shanghai lost considerably in the overnight as the yen advanced against higher yielders like the Pound sterling and the Euro. An even better visual can be read in the February 27th global rout as equity markets around the world were emptied out, helping the yen. As a result, with the Bank of Japan likely out of the picture for the moment, yen momentum will be established by market risk and not Japanese monetary policy. However, this week?s theme may be slightly different as economic data is in full force for the world?s second largest economy. Should figures be optimistic for a rate hike in September, yen favoritism may very well build on fundamental justification.