Yen Posts Longest Winning Streak Since September on Haven Bid

  • Japanese currency gains on concern about slowing gloabl growth
  • Goldman Sachs reiterates forecast for gains to be reversed

The yen rose, posting its longest run of weekly gains since September, as investors look past signs of improvement in the U.S. economy and instead channeled their cash into haven assets.

Japan’s currency strengthened against all its 16 major peers even after a U.S. report showed inflation rose the most in more than four years last month. 

The yen has been the chief beneficiary of weeks of turmoil stemming from concern that global growth is slowing, and policy makers, investors and strategists are weighing whether this strength can last. Goldman Sachs Group Inc. reiterated its forecast for the currency to trade more than 15 percent weaker by year-end, even as options contracts show investors are paying up to protect against yen gains.

“When you have a risk-off market, safe haven flows go to the highest-liquidity currency with a current account surplus, and that’s Japan," said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management, which oversees $125 billion. Vail said she wouldn’t bet on the dollar strengthening against the yen. 

Japan’s currency advanced 0.5 percent to 112.63 per dollar at 5 p.m. in New York. The yen rose 0.4 percent to 125.31 against the euro, after earlier reaching 125.02, the strongest level since June 2013.

Haven Assets

The yen has gained for a third week, the longest streak since the five days ended Sept. 4. That move has come even after Bank of Japan Governor Haruhiko Kuroda unexpectedly adopted negative interest rates at the end of last month, sparking speculation the central bank may intervene to arrest the currency’s gains.

Japanese authorities will find it “very difficult” to step in should the yen’s appreciation accelerate before Group-of-20 finance ministers and central bankers meet next weekend in Shanghai, said Mansoor Mohi-uddin, senior markets strategist in Singapore at Royal Bank of Scotland Group Plc.

The premium for options protecting against gains by the yen, compared to those insuring against a loss, rose to near the highest since 2010, three-month risk reversals show. Dollar-yen’s 14-day relative strength indicator is, however, close to 30, a level that some traders view as a signal the currency has reached extreme levels and may reverse.

Forecasters are also unconvinced that yen strength will be sustained. Goldman Sachs sees the yen weakening to 120 per dollar “in the near term,” and 130 by year-end, Goldman analysts led by chief currency strategist Robin Brooks wrote in a note to clients Friday.

The median of more than 50 estimates compiled by Bloomberg calls for the yen to slump to 120 per dollar by the end of March, and to 123 by year-end.