Yen Spikes 1.2% In An Hour, Global Markets Brace For Shockwaves

(MENAFN- Investor Ideas) ) a trusted platform for investing ideas issues market commentary from deVere Group.

A one-hour yen spike just exposed how fragile global markets have become, warns the CEO of global financial advisorydeVere Group.

The yen exploded 1.2% higher against the dollar on Wednesday, tearing to 158.22 in a matter of hours during US trading before reversing hard, and by the next morning in Tokyo it had slipped to 158.85, down 0.1%.

deVere's chief executive Nigel Green says the speed of that swing is "a warning global investors can't afford to ignore."

The spike came after a Bank of Japan board member raised the prospect of an outsized or back-to-back interest-rate increase, with swaps markets now pricing in a hike at this month's policy meeting.

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The move didn't stay contained to Tokyo. A broad measure of dollar strength slipped as much as 0.3%, emerging-market currencies climbed, and the yen jumped about 1% against the euro within minutes.

Companies with heavy Japanese revenue, global bond funds holding yen-denominated debt, and emerging-market currencies that move in sympathy with the yen can all be caught by the same afternoon of volatility, Nigel Green adds.

Officials have already intervened once this year, and investors should not assume they won't again.

Japan spent a record $96.4 billion defending the yen over the past month after it slid to its weakest level in roughly four decades, with a coordinated buying operation clawing back around 5% from that low.

In January, a single phone call from currency officials to banks was enough to send the yen surging 1.75%.

Behind the volatility is a bigger problem for Japan.

The country is running a wide interest-rate gap with other major economies, and investors are growing uneasy about its fiscal direction under Prime Minister Sanae Takaichi's aggressive spending plans.

Hedge funds that slashed bearish yen bets after last month's intervention are already rebuilding short positions, betting officials will hesitate to step in again.

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