Japanese Yen Strength

The Japanese Yen is one of the stronger currencies right now, ranking #2 of eight with a score of +19. The biggest tailwind is interest rates. With a short-term rate around 1.2%, the Japanese Yen offers a meaningful yield advantage over most of its peers, which tends to attract capital into the currency. Markets are relatively calm and risk appetite is healthy, which takes some shine off the Japanese Yen. As a safe-haven currency, it draws less demand when investors are confident enough to chase yield elsewhere. The underlying economy is a bright spot — tight labour markets and solid employment data give the Japanese Yen an extra edge over currencies where the jobs picture is deteriorating. The trend is positive — the score has gained 15 points over recent weeks. On a valuation basis, it looks cheap versus its own one-year range, which may help cushion the downside from here.