FXY - FXY: The Japanese Yen Will Determine The Future Of Currency
2024-05-02 17:04:08 ET
Summary
- The Japanese Yen has reached its lowest level since the 1980s, experiencing a significant devaluation trend.
- The Yen's devaluation to gold is more significant than its devaluation to the dollar, indicating potential economic and financial issues in Japan.
- With a total public and private debt to GDP over 500%, Japan cannot raise rates without creating an economic crisis.
- To avoid raising rates, Japan is selling US dollars to prop up its currency temporarily, but that cannot continue forever.
- If crude oil rises, Japan's currency crisis will likely accelerate given its inflation rate is primarily a function of its oil import costs.
The Japanese Yen has crashed to its lowest level since the 1980s, seeing its most dramatic drawdown in many years. The Yen can be bought and sold indirectly through the little-known Invesco ETF, Invesco CurrencyShares Japanese Yen Trust ETF ( FXY ). FXY is a long-yen short USD fund directly tied to the exchange rate. Accordingly, in recent years, it has lost around 30% of its value in a currency devaluation trend that appears unlikely to slow. See below: