Yen due for a pause that won't change the downward trend

04/08/2013 4:23 pm EST


Jim Jubak

Founder and Editor,

Too far too fast?

The yen fell another 1.7% against the U.S. dollar today to 99.23 to the dollar. The currency has now tumbled 6.2% since Thursday’s more aggressive than expected move by the Bank of Japan. The yen is now down 21.4% in six months.

Support for the yen is just ahead, though, at 99.75 to the dollar and I think the Japanese currency may need to make a couple of runs at 100 yen to the dollar before it breaks below that level.

Some backing and filling would be only normal after this big a move and I’d expect to see some profit taking over the next few days, especially among stocks of exporters and big banks that have moved up so strongly in the last week. For example, shares of auto exporter Mazda Motor (7261.JP in Tokyo) are up 17% from April 2 through the Tokyo close on April 8. With the intervening weekend that’s a huge move in just four trading sessions.

The Bank of Japan meets again on April 26. Given the fireworks at the April 3 to April 4 meeting, I’d expect lots of volatility in the run up to that session.

I don't think you need to sell existing positions in Japanese stocks, such as my Jubak's Picks recommendations of Toyota Motor (TM) or Mitsubishi UFJ Financial Group (MTU) during this pause. But if you've been looking for an opportunity to increase your holdings in Japanese stocks--for the short-term currency move--you might get an opportunity during this pause.


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