Trump Presidency Win Knocks US Dollar Japanese Yen Exchange Rate to Monthly Low

The US Dollar to Japanese Yen exchange rate became one of the most-traded exchange rates on Tuesday night and Wednesday morning as markets reacted to the shock of Donald Trump’s Presidential win by turning to ‘safe havens’. USD/JPY actually trended near the week’s opening levels of 103.10 after Tuesday’s surge and Wednesday’s plunge.

US Dollar (USD) Undermined by Shocking Trump Election Win

Unorthodox Republican Donald Trump will be the next President of the United States of America; that’s the shock the world woke up to on Wednesday morning and the shock that’s been driving forex markets all day.

After performing strongly right up until the election results began to come in on Tuesday night, the US Dollar plummeted across the board as markets panicked at the prospect of the US taking on Trump’s protectionist trade and foreign policies.

While a ‘safe haven’ currency itself, the uncertainty of the US Dollar’s trade future left it an extremely volatile investment on Wednesday as investors flooded to other traditional ‘safe havens’ like the Japanese Yen.

The US Dollar’s sharp Wednesday movements were softened slightly by Trump’s acceptance speech, in which he adopted an uncharacteristically ‘Presidential’ tone that gave markets a little hope that his proposed policies were just populism at work.

Japanese Yen (JPY) Soars on ‘Safe Haven’ Rush

The Japanese Yen was one of the market’s single most appealing investments following the shock election win of Republican Donald Trump.

The traditional ‘safe haven’ currency has become a popular place for investors to hide their assets in times of market shock and uncertainty – despite the mixed performance of Japan’s economy itself.

In the last year, the Yen has become especially closely correlated to the US Dollar, becoming a favourite to traders put off by the US Dollar due to the Federal Reserve’s low interest rates (despite Japan’s own interest rates being lower).

However, the Yen’s Wednesday surge may have been limited by Trump’s acceptance speech as well as news that Japan still intended to intervene in the forex market if USD/JPY became too overvalued.

US Dollar to Japanese Yen Forecast: 100.00 USD/JPY in Sight

Despite its influential and wide plummet on Wednesday, USD/JPY had been able to recover to near the week’s opening levels during the day’s European session.

This doesn’t necessarily mean the pair has settled on levels of key psychological support however, as investors will continue to sell off the US Dollar when American markets open on Wednesday.

Any comments from Trump in the next few days and weeks indicating his willingness to follow through with his previously proposed protectionist policies will also put considerable pressure on the US Dollar.

Lastly but perhaps most influentially is the effect the market shock has had on Federal Reserve interest rate hike bets. Amid market instability, a rate hike is increasingly unlikely meaning the Fed may put off hiking into 2017 or beyond.

The lack of a December rate hike after markets had priced them in would also cause investors to lose interest in the US Dollar.

There remain very few, if any, strong upward factors for the US Dollar without a December rate hike. As a result, USD/JPY will likely trade with a downward bias for the short to mid-term and could hit the key level of 100.00 before 2017.