Yen ETF Rallies Nearly 2% as BOJ Holds Steady

ETF Trends

CurrencyShares Japanese Yen Trust (FXY) rallied nearly 2% in early U.S. trading Tuesday after the Bank of Japan held back from announcing any additional stimulus measures to spark inflation and weaken the currency.

A stronger yen and a 1.5% pullback in the Nikkei 225 Index pushed WisdomTree Japan Hedged Equity (DXJ) lower by 3.6% at last check. The iShares MSCI Japan (EWJ) slipped 1.6%. DXJ fell harder because it hedges its currency exposure to the Japanese yen.

Volatility in Japanese stock and currency ETFs has ratcheted up in recent weeks as investors speculated on the BOJ’s next move after a huge Nikkei rally and plunge in the yen. [Japan ETFs: Investors Await BOJ Decision]

“The BOJ’s announcement was not necessarily significant, but headed into the meeting there was some hope they would extend the lending terms and they disappointed on that end,” said Vassili Serebriakov, foreign exchange strategist at Wells Fargo, in a Reuters story.

“When it comes down to it, the BOJ announcement was not the main catalyst for the yen’s rise, but rather a general risk-off environment stemming from a slide in higher yielding emerging market currencies,” he said. [Emerging Market Currency ETF Falls]

“Most investors didn’t expect any action, but a handful of players thought officials might have done something to put a lid on rising bond yields,” added Joe Manimbo, a market analyst at Western Union Business Solutions, in a Bloomberg News report. “Since that didn’t materialize, we’ve seen a sharp sell-off in the Nikkei. They didn’t do much to instill optimism that Japan is leaning towards more action to settle markets.”

WisdomTree Japan Hedged Equity

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The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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