Yen’s Bearish Signals Expand as Ties to Stocks Rise: Currencies

Yen’s Bearish Signals Expand as Ties to Stocks Rise: Currencies

By Kevin Buckland and Kazumi Miura Nov 14, 2014 3:17 AM PT

 

 

The link between Japanese stocks and the yen is back on the rise, foreshadowing tougher times ahead for a currency that’s already the weakest since 2007.

 

The 30-day correlation between the dollar-yen rate and the Nikkei 225 (NKY) Stock Average climbed to a four-month high of 0.4 this week, up from zero before the Bank of Japan unexpectedly pledged on Oct. 31 to pump more money into the economy. A reading of 1 would mean the two were moving in lockstep, while minus 1 would mean they were moving in opposite directions.

 

Stocks in Japan are rallying as the extra stimulus measures encourage investors to buy riskier assets, pushing the Nikkei to the highest level in seven years. That, in turn, is damping demand for the yen, traditionally regarded as a haven in times of stress because of the nation’s current-account surplus. Continue Reading.