Yen ‘The Immune Corona’ & Conquering the US Dollar, Are There Chances?

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Safe assets are in full swing in the first quarter of 2020 due to the corona virus pandemic (COVID-19) which triggered turmoil on global financial markets. Corona virus attacks almost all countries in this world. Based on Johns Hopkins CSSE data, to date 184 countries / regions have been exposed to COVID-19, infecting more than 1.5 million people, with 88,444 people dying and 329,492 recovering.

As a result of the pandemic, many countries adopted a regional quarantine policy ( lockdown ) so that economic activity declined, a sharp economic slowdown was inevitable, even a recession. It is still unknown how deep the recession will be, certainly the longer the pandemic lasts, the deeper recession.

The impact, investors take action to sell risky assets, and go into safe haven assets. Most visible investment flows into bonds (Treasuries) United States (US), which yield- it plummeted, and gold where prices rose during the first quarter-2020.

In addition, there are three currencies that are considered safe haven, namely the US dollar, the Japanese yen, and the Swiss franc. When other currencies are falling due to the corona virus pandemic, these three currencies are actually immune.

During the first quarter of 2020, the trio of invulnerable currency corona recorded a strengthening, the US dollar had no question about its strength, all currencies, both emerging markets and developed countries, were shattered.

However, the US dollar still lost compared to the yen and franc. In the January-March period, the US dollar weakened almost 1% against the yen and 0.72% before the franc.

The yen is the most successful currency, although Japan is also not free from the corona virus. To date in Japan there have been 4667 positive cases of COVID-19, with 94 people dying, and 632 recovering.

Last Wednesday, Japanese Prime Minister Shinzo Abe announced emergency status in Tokyo and six other prefectures and is valid for the next 1 month. During this time, Japanese citizens were asked to remain at home, unless it was urgent.

Abe also announced a fiscal stimulus of nearly US $ 1 trillion to fight the corona virus.

The Japanese yen is considered one of the safe haven assets because Japan’s status has a surpluslarge current account that provides a guarantee of stability for the currency.

Besides that, the Land of the Rising Sun is the largest creditor country in the world. Based on data from the Japanese Ministry of Finance quoted by C NBC International , the number of foreign assets owned by the Japanese government, private, and individuals reached US $ 3.1 trillion in 2018. The status was able to be maintained in 28 consecutive years.

The number of foreign ownership of assets by Japan is even 1.3 times more than Germany which is ranked as the second largest creditor country in the world.

When there is turmoil in the financial markets like now, Japanese investors will repatriate their funds abroad, so that capital flows return to the Rising Sun country, and the yen becomes stronger.

Against the rupiah, the strengthening of the yen in the first quarter of 2020 was also greater than the US dollar. In that period, the yen recorded a strengthening of 18.88%, against the rupiah, while a strengthening of the US dollar by 17.44%.

Not only that, the yen even set the most expensive record in history against the rupiah many times in March. And the latest most expensive record of Rp 154.32 / JPY was achieved on April 2 last.

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