TA: Ultimate Safe Haven, Not Gold, Dollars, or US Treasuries

Bloomberg reported on Tuesday (October 29) that despite the yen weakening this year, history shows that the yen is still expected to be an unexpected safe haven for investors seeking shelter. Data compiled by Bloomberg shows that the yen has outperformed the US dollar, Swiss franc, gold, US Treasury bonds, and the euro, among the most popular safe assets. According to Bloomberg's analysis of safe-haven asset trends and implied volatility in the US stock market, the yen has once again become the best-performing currency during periods of extreme market tension.

Although the yen is the worst-performing Group of 10 (G10) currency this year, traders tend to turn to the yen during periods of intense market volatility. There is uncertainty following the Japanese parliament on October 27. The yen fell 1% against the US dollar after the ruling coalition failed to win a majority in parliament. It may take several weeks of political maneuvering before a new government is formed, which exacerbates the significant selling pressure on the yen due to the huge interest rate differential between Japan and other major economies.

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However, investors say the yen still has key advantages. Japan's record current account surplus of 3.02 trillion yen (approximately $20 billion), a large amount of yen liquidity, and relatively low inflation in Japan all help make the yen, the world's third-largest traded currency, an attractive store of value. In addition, tariff risks also favor the yen. During the election campaign, Japan largely avoided the direct threat of import tariffs - these warnings keep investors highly vigilant about the potential damage to the assets of targeted countries.

Equally important, the yen exchange rate is at a historical low, giving it more room to rise in the event of intense market volatility or government intervention to support the yen.The Bank of Japan is currently the only developed market central bank that is close to considering raising interest rates as its next policy move.

Despite widespread expectations that the Bank of Japan will keep interest rates unchanged this week, if the current weakness of the yen exacerbates inflation, the chances of the Bank of Japan raising interest rates later this year may increase.

At 13:49 Beijing time, the USD/JPY is quoted at 152.84.