Japanese Yen ETFs Tumble As Dollar Breaks 100 Yen

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 |  Includes: FXY, YCS
by: Tom Lydon

The Japanese yen exchange traded fund is at a new 52-week low as the currency weakens beyond the 100 per U.S. dollar psychological mark for the first time since 2009.

The CurrencyShares Japanese Yen Trust (NYSEARCA:FXY) was down 1.5% late Thursday. Year-to-date, FXY has declined 12.5% as the Bank of Japan enacted a more aggressive monetary policy and set a 2% inflation target.

The USD to Japanese yen exchange rate rose 1.7% Thursday to $100.67/¥. The last time the yen broke the $100 level was on April 14, 2009.

Japan's currency depreciated 3.5% since the start of April after Bank of Japan Governor Haruhiko Kuroda unexpectedly announced the central bank's decision to double monthly bond purchases and buy long-term debt in a bid to hit the 2% inflation goal, reports Kevin Buckland for Bloomberg.

Economists expected a 5.2 trillion yen monthly bond purchase program, but Kuroda came out with a 7 trillion, or $700 billion, plan.

The BOJ aggressive move is the latest bid to jump start a stagnating economy suffering from incessant deflationary pressures.

"What creates Japan's deflation is the aging of society," Hideo Kumano, chief economist at Dai-ichi Life Research Institute Inc., said in the article. "Robust economic growth and business opportunities that provide future income are needed to end deflation. Even if the central bank raises the flag of inflation, whether people will follow it is a different matter."

Amid grumblings of a currency war, the G-20 endorsed the BOJ's stimulus measures, supporting the devaluation of the yen as long as the focus was on improving domestic demand.

Investors have taken advantage of the sliding yen by shorting yen assets, including FXY. More aggressive traders have also looked at the ProShares UltraShort Yen ETF (NYSEARCA:YCS), which has gained 27.2% year-to-date. As a leveraged inverse fund, YCS is a trading vehicle rather than a long-term investment. It can be extremely volatile.

CurrencyShares Japanese Yen Trust

Click to enlarge

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.