Risk aversion supports JPY, Gold higher

Tuesday, February 09, 2016

The yen resumed its run of strength against the dollar after a brief respite around 117.00 late last week as well as early moves yesterday giving back some of the previous week’s gains towards 117.50. Demand for safety saw the yen gain 1.4% against the greenback at one point during overnight trading, reaching levels last seen in November 2014 as the currency traded around 114.21. However, investors gave back some of these gains as we approached the European session with the yen trading around 115.30 at the time of writing.

10 year Japanese government bond yields declined to unprecedented levels, dipping into negative territory in a steady decline since the start of the month after the Bank of Japan announced a surprise negative rate cut at the end of January. 10 year yields dropped as low as -0.080% during the Asian trading session before recovering slightly to -0.025% at the time of writing and with global market volatility set to persist we expect additional yen strength over the coming sessions.  

In a further sign of investors flight to safety, spot gold prices rallied for a seventh straight session yesterday as risk appetite continued to wane. Spot prices for the precious metal rose to an intraday high just above $1,200/oz but were unable to hold onto these heady gains, however, still managed to close 1.5% higher at just below $1,190/oz. Gold prices have added over six percent since the start of the month and with Chinese markets shuttered for the entire week we could see this continued risk aversion persist as a lack of cues from central bankers around the world fosters a pessimistic market sentiment.

JPY strengthens further against USD

JPY Curncy Japanese Yen Spot 2016 02 09 07 55 45

Gold rallies on renewed risk aversion

XAU Curncy Gold Spot Oz D 2016 02 09 08 11 05

Events for today

CN Market Holiday 

0700

DE

Dec

Trade Balance

0930

UK

Dec

Trade Balance

0930

UK

Dec

JOLTS Job Openings

1500

US

Dec

Wholesale Inventories MoM

Topics: Gold, JPY, Yields
More from: Kash Kamal