Yen Surges as Haven Amid Trade Fears
The yen outshone other G-10 currencies against the dollar on Monday, gaining as much as 0.5%. Investors sought refuge in the Japanese currency amid concerns that President Trump's tariffs and sanctions on Colombia could escalate trade tensions and pose economic risks.
The yen's strength stemmed from the "risk-off" trend following Trump's announcements on social media. It had earlier gained 0.8% after the Bank of Japan's rate hike to its highest since 2008.
Despite the dollar's strength against other majors, Jin Moteki, a currency strategist at Nomura, suggests that the yen's rise could be attributed to investors avoiding the Swiss franc due to tariff concerns and negative rate fears.
Japan's limited financial exposure to Colombia appears to have played a role in the yen's surge. Outstanding portfolio investment in Colombia stood at just $575 million in 2023.
Strategists also point to the Bank of Japan's rate hike as a contributing factor, narrowing the yield gap between Japan and other countries. Hedge funds reduced bearish bets on the yen ahead of the hike, supporting the currency.
Jane Foley, head of G-10 FX strategy at Rabobank, predicts the yen will continue rising, reaching 145 against the dollar within a year. Despite fluctuations after the BOJ's meeting, she maintains that the currency's strength will persist.