Yen Reaches 1-Year High as Global Markets Rout Adds Haven Demand

  • Japanese currency has risen versus all 31 major peers in 2016
  • Rattled companies must rework budgets, hedges, Cambridge says

The yen advanced to its strongest level in a year as a global selloff in equities and commodities deepened, spurring demand for refuge assets.

Japan’s currency, which has appreciated more than 2 percent versus all 31 of its major counterparts this year, rose as sliding oil prices and slowing economic momentum in China damped the outlook for global growth. The Mexican peso dropped to a record, while the currencies of other commodity-exporting nations also fell.

The rout across financial markets and resulting currency-price swings have prompted some firms to revisit their operating budgets and adjust currency hedges, said Karl Schamotta, director of foreign-exchange research and strategy in Toronto at Cambridge Global Payments, which manages currency risk for companies.

“Many treasurers have seen their forecasts blown out of the water, so they’re going back to the drawing board to reset those to more realistic levels," Schamotta said.

The yen strengthened 0.6 percent to 116.94 per dollar as of 5 p.m. in New York, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.8 percent to 127.35 per euro. The euro was little changed at $1.0890.

“There’s certainly an underlying stress in the market, which has been elevated by the uncertainty we’ve seen in the global equity markets, Chinese currency policy and oil prices,” Mike Moran, the head of economic research for the Americas at Standard Chartered Plc, said from New York.

Global equities plunged as crude oil futures traded in New York dropped to levels last seen in 2003. The International Monetary Fund cut its world growth outlook on Tuesday, highlighting weaker prospects for commodity-producing nations.

World Currency Ranker - year to date
World Currency Ranker - year to date

“Risk sentiment has deteriorated considerably since start of the year,” said Manuel Oliveri, a currency strategist at Credit Agricole SA’s corporate and investment-banking unit in London. “The yen has been among the strongest currencies. We increased our yen forecast profile mainly on the back of more elevated risk aversion.”

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