On December 27 I switched to the Invesco Currency Shares Japanese Yen ETF (FXY) from the Vanguard FTSE Developed Markets ETF (VEA) in my Perfect 5 ETF Portfolio (on my subscription sites JugglingWithKnives.com and JubakAM.com) in an effort to get more yen exposure and a little more safety during this Bear market. Tomorrow I’m going to add this ETF to my Jubak Picks and Volatility Portfolios (on my subscription sites JugglingWithKnives.com and JubakAM.com) for the same reason. I don’t think the gains from this ETF will be eye-popping during the Bear–I’d be happy with 5%–but this does look like one of the few places to park money right now that promise any gains and solid safety.
Japanese stocks themselves moved into a Bear market on Christmas but the yen looks like it will again gain from its role as a safe haven currency in times of turmoil. (And especially in times of turmoil for the U.S. dollar.)
The yen is up 2.5% against the dollar from the close of trading on December 28 in Tokyo to today, lining the currency for the biggest advance during any Japanese new-year-holiday break since 2008, according to Bloomberg. The Bank of Japan is now the only major central bank following a policy of quantitative easing in a so-far vain attempt to flood the market with liquidity in order to push up both economic growth and inflation by keeping the price of the yen low. But in the face of slower growth in Japan and the Federal Reserve’s decision to back off on the pace of its interest rate increases, investors and traders seeking safety have bought yen faster than the Bank of Japan can add to supply. That’s not good news for Japanese exporters, who are seeing the price of their goods climb from overseas buyers, or for the Japanese economy.
But it doesn’t look like the trend is about to reverse itself soon. In early trade in Asia–Japan’s markets are still closed for the country’s New Year’s holiday–the yen climbed to 104.74 to the dollar in intraday trading. That’s within spitting distance of the March low at 104.74 to the dollar. And it looks likely to bring into play a climb to 100 yen to the dollar.
I’m looking for safety here and I won’t be holding this position longer than the Bear market lasts. I’d be happy with a 5% gain during that holding period.