Financial literacy is gained at YENzukura's Investment University (Academia) | Episode 6 [YEN-zou]

YENKura-san Profile

Enzou. Having worked for over 20 years as a foreign exchange dealer at American-based Citibank, UK-based Standard Chartered Bank, and other foreign banks, he is currently a top professional trader trading currencies, Nikkei 225, Nikkei options, and individual stocks. He is the CEO and representative director of ADVANCE Co., Ltd., primarily distributing investment information. He has deep knowledge not only of major currencies such as the dollar and euro but also of emerging currencies, including Asian currencies, in which he conducts dealings. He also has close relationships with overseas traders and fund personnel.

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*This article is a reprint/edit from FX攻略.com July 2020 issue. Please note that the market information written in the body is different from current market conditions.

From Pessimism to Optimism in the Market

March 2020 saw markets with extremely high volatility and large fluctuations. The USD/JPY fell by 0.46% for the month (from open to close), while the high-low range fluctuated by 9.75%.

Among major pairs against the dollar, the Australian dollar showed the largest fluctuation (high-low) at 18%, followed by the New Zealand dollar at 15.67%, and the Pound at 13.95%. Against the yen, the Australian dollar moved 16.54%, the New Zealand dollar 12.69%, and the Pound 10.94%. Surprisingly, the Euro/Dollar had relatively muted movement at 7.8%, and the Euro/Yen at 4.21%. The Dollar Index, indicating dollar strength, rose 0.85%, with a total range of 8.5%.

As the COVID-19 outbreak spread across countries, lockdowns and other restrictions on economic activity began. Economic indicators in March confirmed a sharp slowdown in the economy. It was expected that the economy would slow, so most advanced countries' central banks cut rates close to 0% and implemented aggressive QE (asset purchases) and massive liquidity provisioning in short-term financial markets. We discussed this in previous issues, so please refer to those for details.

Financial markets tend to anticipate the future before the real economy, so these powerful monetary and fiscal policies shifted the market rapidly from despair to optimism. Stock prices plunged and then rebounded, the dollar surged and then fell, and the yen weakened against the dollar and then strengthened against the yen, causing large fluctuations.