Yen Kicks Off 2020 With an Advance as Treasury Yields Slide

(Bloomberg) -- The yen touched its strongest level against the dollar since November in the first full trading day of the year as Treasury yields slid and stocks pared gains.

Japan’s currency was up about 0.2% Thursday at 108.52 per dollar, after touching 108.21, the strongest since Nov. 4. The yen appreciated against all its major peers, though the gains came in thin trading with Japanese markets still shut for the New Year. The 10-year Treasury yield fell as much as 7 basis points to 1.85%, the lowest since Dec. 16.

Although a major catalyst was lacking for the day’s trading, history shows that January has proven to be a good time to buy Japan’s currency. The yen has climbed versus the dollar this month in seven of the last 10 years. Global investors tend to sell dollar holdings at the start of the year to make fresh investments overseas, a seasonal pattern that supports the case for a stronger yen.

“The yen is an interesting currency because it still has attractive qualities as a safe haven and risk dampener,” said John Velis, a strategist for Bank of New York Mellon. “The pro-yen story is that we will still get bouts of risk aversion this year” that could drive the currency higher.

Traders do have geopolitical tensions to be wary of. In North Korea, Kim Jong Un said he was no longer bound by his pledge to halt major missile tests, while tensions have also escalated in the Middle East.

With Japan’s markets still shuttered and liquidity low, investors are on edge about the possibility of unusual swings in the yen, as seen in a similar trading environment a year ago, when it gyrated wildly and surged against its counterparts. By mid-day in New York on Thursday, the yen had already given up much of its gains versus the dollar.

To contact the reporters on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net;Alyce Andres in Chicago at aandres17@bloomberg.net

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Mark Tannenbaum

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