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Resolved Question
Why the yen is seen as a safe haven?
I'm starting to study about fundamental analysis and, so far, I know that the U.S. currency is the safe haven.
My question now is: what reason for the Yen currency also be seen as a safe haven for traders?
over 2 years ago
Best Answer - Chosen by Voters
Before the financial crisis the Yen was a carry currency and the Yen carry trade was massive. So whenever the risk trade anywhere in the world was being scaled back, the Yen would have to go bid. This, coupled with the belief that the Japanese economy was in good shape and somehow 'decoupled' via it's exports to China and the rest of Asia made the Yen a safe haven refuge.
The Yen carry trade is long gone. Now that everybody else has the same "zero interest rate policies" the trade has been unwound. The Japanese economy is absolutely imploding as the fatal flaw in the great export experiment is revealed. No amount of so called "stimulus" at home will make up for evaporating foreign demand, especially after fifteen years of bridges to no where has satiated local demand. Japanese debt to GDP ratio is well over 100% and rising.
Why then is the Yen still considered a safe haven?
Investors typically buy the yen as a haven for their cash because Japan’s current-account surplus reduces the country’s dependence on borrowing abroad.
The current account consists of the balance of trade, plus net factor income from abroad plus net unilateral transfer from abroad.
over 2 years ago
Answers (1)
It's not really as a "safe" haven. The market prefers to run to countries with account surpluses and Japan seems to be one of the biggest ones.
over 2 years ago
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