Is Yen Strength Due to China Diversification?
Yesterday we saw the yen climb to a 15-year high against the US dollar as investors turned risk averse after the Fed and Bank of England’s dovish outlooks for their respective economies rattled markets. This was coupled by Chinese growth data showing that growth continues to slow in the Far East, reigniting concerns of a double-dip in the global economy. However, we have seen an extended period of yen strength which stretches past the most recent resurgence of investor fears regarding the outlook for the global economy and the dollar’s fall from favour, back to the beginning of the financial crisis. Recent data from Japan’s Ministry of Finance showed China bought $5.3 billion worth of Japanese assets in June, adding to the $20 billion worth of assets it had already purchased earlier in the year. It is our position that the yen, and other currencies, may continue to strengthen if China continues to diversify its massive $2.5 trillion in foreign exchange holdings. As China moves into oth
