Watch the Yen Amid Nervous Forex Markets

11/17/2017 4:54 pm EST

Focus: CURRENCIES

Robert Savage

Partner & CEO, CCTrack Solutions

The forex markets’ favorite risk-off tool is the Japanese yen. This may be the currency to watch as rates, equities and politics mix into a difficult match, writes Bob Savage, CEO of Track Research Friday.

Friday isn’t the day to build cars or buy risk but rather to wait for the lights to turn on and watch the next game. This is also the end of the normal trading into Thanksgiving, Black Friday and the inevitable Christmas holidays.

December holds plenty of risks with the tax debate, debt ceiling and other hard political choices ahead.

Today is not even close to a playoff event. Even so, markets are nervous as we open the U.S. with little to prevent a modest profit taking from Thursday’s hard-earned bounce back in equities, credit and the USD.

The U.S. dollar (USD/EUR) is weak off 0.2%, but not alone in currency pain with New Zealand dollar (NZD/USD) touching June 2016 lows off 1%.

There were two main stories that turned the risk overnight:


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Robert Mueller has issued subpoenas to Donald Trump’s campaign requesting Russia-related documents.

North Korea is building a ballistic missile submarine.

The list of other notable stories are more about emerging markets with Moody’s upgrade to India bonds to Baa2 – first upgrade since 2004 – a surprise – while the Bank of Indonesia keeps rates on hold at 4.25% - as expected.

There was a dearth of data – NZ PMI and PPI were not bad and don’t explain the shove in NZD lower, even as commodities are mostly bid, risk is mixed.

The U.S. data on housing starts is unlikely to matter in changing the tender risk-off mood even as other news agenda items loom like the Senate Finance committee expected to pass its GOP tax reform bill today and push it to Senate for debate into next week.

NAFTA talks this weekend in Mexico ongoing to March and Chile presidential election on Sunday with Dec. 17 run-off vote.

What this means for today isn’t so clear – but we do know that the forex markets’ favorite risk-off tool is the Japanese yen (JPY/USD) and it’s soggy with risk for 112.25 and 111.65 thereafter (Oct. 16 lows). This may be the currency to watch as rates, equities and politics mix into a difficult match.

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