Yen Climbed 3% from Twenty Years Low on Speculation of Weakening Dollar

The yen is recovering from a 20-year low, suggested by the options market and analysts with rebound has some room to run.

After rising over 3% from its trough, Japan’s currency may climb back to 125 as global growth worries fuel demand for havens and U.S. yields ease, according to Shinkin Asset Management and IG Markets Ltd. Option markets indicate there’s a 64% chance the yen will strengthen past the 125 mark by end-June.

The decline in dollar is driving the yen’s rebound as traders speculating that aggressive rates hike by the Federal Reserve tightening may tip the US economy into a recession.

Short positioning on the Japanese currency has eased in recent weeks, offering some respite to policy makers who have sought to halt its drop with limited success.

“The yen is bound to strengthen when stocks and yields fall on wariness about the economy,” said Jun Kato, chief market analyst at Shinkin Asset in Tokyo, who has a target for the dollar of around mid-125 yen in the next two to three months. “Sentiment is tilting toward risk-aversion.”