Japanese Yen Finds Direction As Investors Show Currency Is ‘Undervalued’

The Japanese yen is continuing to find direction at the end of the trading week as analysts say that the currency is “undervalued.” As the market fears over the Turkish crisis dissipate, several currencies are looking to gain some momentum in this volatile environment, and one of them might be the yen.

In the fallout of the lira crash, investors have been diving into the Japanese yen. And this could help appreciate the currency for the remainder of 2018.
According to Bloomberg, various financial experts are in agreement that the yen “looks pretty undervalued.” Because of the crises in Turkey and in the emerging market, in addition to Japanese bond yields rising and accommodative monetary policy, analysts think the yen is an attractive investment.
Shanti Keleman, director and investment adviser at Coutts and Co., told the business news network:

If you look at the Yen it looks pretty undervalued, and I think the central bank rumblings earlier in the month are a reminder of the heft and global influence of the Japanese central bank, and any move forward on interest rates, or forward guidance, would boost the currency.

These comments are supported by technical studies, many of which show there is strong demand for the yen, despite some bearish calls and reports in recent months, stemming from domesticv monetary policy.
With second quarter gross domestic product (GDP) beating market projections at an annualized rate of 4.0%, investors seem confident that Tokyo can turn things around heading into 2019. This was further supported after industrial production data in June was better than initially expected.
Also, the country’s July 2018 year-on-year exports decreased 3.9%, while YOY imports jumped 14.6%.
The only setback could be if interest rates remain lower for longer, something that the Bank of Japan (BOJ) has confirmed will be the case to spur economic growth and weather the global trade storm. This is the opposite of what the Federal Reserve is doing, which has been the gradual normalization of rates. The US central bank is expected to raise rates two more times in 2018 – one in September and one in December.
The US dollar has looked attractive for much of 2018 amid a strengthening economy, a booming labor market, and a hawkish Fed. On Thursday, the US Dollar Index dipped 0.12% to 96.60, but it is still poised for a weekly gain, adding to its year-to-date increase of 4.86%.
The USD/JPY currency pair rose 0.11% to 111.01, from an opening of 110.89, at 23:50 GMT on Thursday. The EUR/JPY jumped 0.07% to 126.26, from an opening of 126.16.

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