A Turn in USD/JPY?

There are many reasons to believe that USD/JPY will head lower in the coming months, most of which centers around the weak US and global economic outlook.

However there is one reason why we could see a turn and that is the correlation between USD/JPY and the VIX (which measures the volatility in the equity market). Usually when the VIX (which is inverted in the following chart) rises, USD/JPY falls because high volatility tends to propel investors into the safety of the Japanese Yen.

What do you think?

Do You Think 87 is the Bottom in USDJPY?
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Everyone was calling for a weak GDP report this morning but I warned that it could be better. Read my comments on this morning’s GDP report at FX360.com and my call for a better GDP number in the Daily Currency Focus



  1. A strong currency = a strong economy. But this is not the case for Japan.
    My view is that, as the economy weaken, so will the currency eventually. Is this the time? Not sure. Risk aversion and market sentiment is unpredictable.

  2. Where is the market going to invest all of the yen it covets and at what return?

    The Speculative market was long JPY 63,369 contracts and short JPY 14,362 and the Commercial market was long JPY 28,783 contracts and short JPY 83,450 contracts. If the JPY bulls can be frightened enough you may have a good USD rally.


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