Barclays: After the yen rebounds, it is expected to regain its safe-haven properties

Barclays said the recent sharp rise in the yen showed that the currency was once again moving in sync with yield spreads, and that the yen would be boosted by its safe-haven status if global growth fears caused equities to fall. "The rapid appreciation of the yen has been accompanied by a return of correlations with yields and equity prices," said Shinichiro Kadota, head of foreign exchange and rates strategy at Barclays Japan. "The recent move in the yen suggests that safe-haven currency dynamics will return to the fold in the context of slowing global growth." Barclays notes that from late April to early July, the yen decoupled from US and Japanese yield spreads and began to decline, out of sync with the narrowing of spreads, "but against the backdrop of rapidly narrowing spreads and equity selling, the yen carry position squaring and the US/Japan eventually began to fall rapidly in sync with yield spreads." The yen and Swiss franc are still seen as safe havens when "stocks tumble on fears of an underlying recession".