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Japanese yen jumps to highest level in 2 decades

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Yahoo Finance markets reporter Jared Blikre examines currency gains for the Japanese yen.

Video Transcript

- Time now for our chart of the day. We've got Yahoo Finance's Jared Blikre standing by with an FX check. Is that what I see?

JARED BLIKRE: That is right. We're going to take a look at the yen. We took a look at the euro earlier today around the open. By the way, it's reaching parity with the dollar. But we're taking a look at the yen right now. And we can see we're at 137, not anywhere near parity. But let's take a look at the year to date. Usually you don't see currencies trend like this. This is a huge move. And in fact right now, the Japanese yen is at the highest level in about two decades, and you can see really just screaming past these highs here, these highs from 2006, 2007.

This trend really began back in 2012. That was the lows there. That was after the global financial crisis. And we saw liftoff here. We got a pause around some of the turbulence that we've had in 2015, but screaming higher. Now the implications for this are pretty big. Usually this is a good sign, because it means it's risk on. But however, with Japanese GDP at about-- or debt at about 250% of GDP, there is some speculation that the central bank may lose control of interest rates. And so there may be a change in policy.

Another thing I want to point out here-- and now I've inverted the Japanese yen, so we can show it along with the NASDAQ-- they are very closely correlated. And I should point out that with the yen now making new lows, in fact, highs against US dollar highs-- this is lows right now-- we haven't seen the NASDAQ kind of catch down to it. So that is a possibility, so usually risk on, good, but not necessarily now. So I guess you could say, maybe it's a little bit different this time.

- Yeah, yield curve control not working so well for the Bank of Japan.

JARED BLIKRE: No control.

- I mean, there's been arguments, some would say, once the Japanese yen hits 140, that's when the Bank of Japan would step in. But I guess the question on the other side is, can they really do anything, when this is more about the dollar than about the yen?

JARED BLIKRE: It is. I think they have their hands as tied as Chair Powell here in the US. So it's really difficult to see how this all plays out. There are lots of moving parts. But this is a multi, multi-decade trend that we've been talking about. So when those reverse, you've got to pay attention. Big things potentially on the horizon in currency land. We know because it's highly leveraged, that can lead to instability in all risk markets, guys.