Newsletter
A man walks past an exchange bureau advertisement showing images of the US dollar in Cairo
dollar reached a new low – making U.S stocks drop more than 2%

Dollar Vs. Yen: Was This A “Black Christmas”?

by -
dollar reached a new low – making U.S stocks drop more than 2%

After the Black Thursday in 1928, the world might have lived another dramatic episode. Baptised “Black Christmas” by some experts, the end of 2018 and the beginning of 2019 are showing a weak dollar.

On Christmas Eve, dollar fell 0.39% to 110.12 yen on Christmas Day, showing the lowest level since August 2018.

Dollar has been worrying markets as it has shown a four-month low, so much so that analysts advise to invest and focus more on the Japanese currency. 

On the other hand, the yen has been showing strong signs of solid health, studding a 16-month high against the British pound trading at 139.90 yen and a four-month high against the euro, at 125.60 yen.

U.S stocks to slide in early 2019

American markets have been trembling for the past few months; but Christmas week was even worse than expected.

Within a few days, from Christmas Eve until now, dollar reached a new low – making U.S stocks drop more than 2%, while oil prices sank more than 6%. Dollar fell 0.39% to 110.12 yen on Christmas Day and even dropped below 110 yen on Monday, December 31st.

Even more worrying, Washington experts expressed their worry, as investors are concerned about a global slowdown in 2019.

For the past days, markets have been agitated – some major figures have criticized the Federal Reserve’s decision, such as the American President Donald Trump. Others, like major analysts, have seen a weak leadership in Federal Reserve’s Chairman Jerome Powell term.

According to CNBC, a market economist shared that if Powell was about to leave, it would “ultimately undermine the confidence in the dollar”.

In other words, investments are not likely to increase in America for this first quarter, as investors are growing a feeling of uncertainty. They rather start looking at other countries than the United States.

Read our story: “Federal Reserve Increases Rates, Despite Trump Opposition”

Investors are looking for options

As we wrote earlier this week, American market seems severely hindered after the Federal Reserve decided to raise interest rates for the first time in more than seven years. It shook the country and made investors starting to look for options, which reflected in some surprising results last week and this week.

Investors started betting on European non-euro currencies. As a result, the Swedish crown was one of the biggest gainers last Thursday, with a gain of 0.6% against the dollar.

Switzerland also had its moment on Monday as its franc rose 0.2% against the dollar. This is a 12-week high of 0.98355 to the dollar, reaching almost a 1% rise, the biggest daily gain in a year.

The Euro also showed healthy signs, despite being a shy increase, as it rose 0.8% to $1.14. With an unstable context on the Old Continent, the eurozone looked strong.

However, another continent is growing stronger and resists to the scarcity of the Western world: Asia is where all the eyes are at.

Is 2019 going to be Asia’s year?

For some experts, it is about time to bet on Asia, especially on the Japanese economy. As Bloomberg suggests, yen has been rising for the third year in a row, the best performance the Japanese currency has shown since 2004.

So, is it going to become the year of Asia, or just Japan? According to economists, China tariffs seem to have put China in a delicate situation towards Western countries, making analysts think that Japan is the safest place for now.

As Shahab Jalinoos, global head of foreign-exchange trading strategy at Credit Suisse Group AG shared to Bloomberg, “If headwinds keep blowing in 2019, the yen could “win by default”” in 2019.

Experts add that news in Japan have been fairly good and positive, encouraging investments, compared to the United States where a bleak political context discouraged foreign and national investors.

 

 

 

 

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.