Yen still under the threat of large fluctuations, judging by historical data

After falling last month to a record low in the last forty years, the Japanese currency is showing an early recovery. Nevertheless, repeating the behavior of similar periods of decline in the past, the yen could face new shocks.

According to Kit Juckes, chief foreign-exchange strategist at Societe Generale SA, there is clear potential for a rapid correction, comparable to the years 1998/1999, 2002/2004, 2007/2011, 2016.

Over the past few days, the yen has been showing growth. The growth dynamics of the Japanese currency is also affected by the aggravation of the situation with COVID-19 in China, which can lead to negative consequences. This situation is threatening riskier assets. To a certain extent, the Japanese currency has regained its defensive asset status, lost in recent months, when interest rate differentials were the focus of investors' attention.

While the Bank of Japan's interest rates have firmly established themselves near zero, and the rest of the world's central banks have increased their borrowing costs, the yen has come under pressure. Now there is more and more talk around the possible termination of rate hikes by the Fed and other central banks, which would partly alleviate the pressure caused by the strengthening of the dollar.