Yen Shows Appeal as Safe Haven Even as Dollar Weakens
The yen withstood the worst of the dollar’s rout on Monday after President Donald Trump imposed new tariffs, suggesting investors still see the Japanese currency as a safe haven in times of turmoil.
The yen rose as much as 0.3% against the U.S. dollar before trading 0.3% lower at 155.61 per dollar at 12:15 p.m. in Tokyo. The euro fell more than 1% against the U.S. currency, as did the Canadian, Australian and New Zealand dollars. Japanese government bonds were also bought as the country’s stocks fell.
The yen’s relative resilience on Monday was not an isolated incident. The yen is the only Group of 10 currency to remain higher against the dollar this year. Elsewhere, signs of a flight from risk assets were evident in a decline in equity markets across Asia after Trump carried out his threat to impose blanket levies of 25% on Canada and Mexico and 10% on Chinese goods, starting Tuesday.
“The yen is rediscovering its credibility as a safe haven,” said Gareth Berry, a strategist at Macquarie Bank Ltd. in Singapore. That’s largely because the Bank of Japan is on a hike path, “but also U.S. Treasury yields are now so high that they’re coming down on risk aversion, and that’s pushing dollar-yen down,” he said
The yen’s move so far in 2025 stands in stark contrast to its weakness over the past four years, as the wide interest-rate gap between Japan and the U.S. kept it under near-constant pressure.
A stronger yen now could give the BOJ more leverage when it decides to add to its recent series of rate hikes, which have narrowed the gap with the U.S. After its hike last month, the central bank is likely to wait until around July to September before making its next move, according to economists surveyed by Bloomberg.
However, some strategists say it’s unclear whether the yen’s appeal as a safe haven will continue given that Japan could also face the threat of surprise tariffs. Prime Minister Shigeru Ishiba will meet with Trump later this week, local media have reported, and their conversation could provide more clues about tariff risks and the yen’s direction.
Japan has a large trade surplus with the U.S., “so I expect Japan to eventually be a target of tariffs,” said Win Thin, chief global market strategist at Brown Brothers Harriman & Co. “In that case, I would see this dollar-yen decline as a buying opportunity because the yen is unlikely to be a safe haven in a trade war.”
Source: Bloomberg
