Buy USD when there is a problem

With the prospect of Speaker of the U.S. House of Representatives Pelosi visiting Taiwan, risk-off buying of yen has strengthened as concerns about U.S.-China tensions rise.

At noon, the dollar is trading lower against the yen, around the mid-130s, compared to the end of the previous New York session. It became clear that Pelosi plans to visit Taiwan, and in the market worries about a resurgence of U.S.-China confrontation surged. Against a backdrop of falling U.S. interest rates and a decline in stock prices, both dollar weakness and yen appreciation progressed simultaneously, briefly updating to 130.40 yen—the lowest in two months since June 3.

Just to be on the safe side, in terms of yen buying in a crisis,it does not mean that we are long the yen because U.S.-China tensions have intensified.

When there is a risk event, yen carry trades that are short on the yen / long on the dollar trigger yen buying to reduce risk, i.e., to unwind the yen short positions and buy back yen.

Therefore, if there are no yen carry-trade positions, there would be no safe-haven yen buying (risk-off yen buying).

Notes

Chinese Foreign Ministry spokesperson Zhao Lijian, at a regular briefing on the 1st, criticized Pelosi's Taiwan visit as “a serious interference in China’s internal affairs” and said that “the Chinese People's Liberation Army will not remain a bystander.”