Yen Resumes Advance as Sub-$30 Oil Sparks Renewed Haven Demand

  • Japanese currency strengthens against most major peers
  • Commodities drop joins China concern fueling refuge appeal

The yen resumed its rally as crude oil’s slump to the lowest in 12 years stoked demand for haven investments.

The Japanese currency, considered among the safest currencies partly due to Japan’s current account surplus, has strengthened this year amid concern China’s financial turmoil will spill into other economies. The oil’s drop below $30 a barrel prompted further selloff in currencies of resource-rich nations, including Canadian and New Zealand dollars.

"It’s a kind of familiar picture with the equities starting the day positively but then reversing gains as oil prices fell to a new low, so that’s what dollar yen is really reacting to," said Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York. "Commodity prices are still a factor that’s weighing on sentiment."

The yen rose 0.1 percent to 117.65 per dollar as of 5 p.m. in New York. It rose every day last week and reached 116.70 Monday, the strongest level since Aug. 24. 

Market Measures

Technical analysis suggests the currency strength may be overextended. The 14-day relative-strength index of the currency pair was below 30 for a fifth day, a signal to some traders that the yen is set to weaken after surging last week by the most since August 2013. A gauge of global currency volatility touched a three-month high.

"We would agree with the yen being expensive, but I think it’s a little bit difficult to navigate this environment for the foreign-exchange market," Serebriakov said.

Crude oil futures fell to $29.92 a barrel in New York, reaching the lowest level since 2003. The Bloomberg Commodity Index dropped to its weakest level since at least 1991.

"More people are calling for sub-$30 oil -- the negative sentiment feeds on itself," said Mazen Issa, senior foreign-exchange strategist at Toronto-Dominion Bank in New York.

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