Fed Near Neutral Signals Caution Ahead, Shifting Focus to Fixed Income in 2026 
US dollar has fallen to below four month low against its major trading counterpart as measured by US dollar index, which is value of dollar against a basket of currencies namely Euro, Pound, yen, Franc, Swedish krona.
However Yen has remained a consistent underperformer, moving in small range of about 200 points while other currencies beating the dollar to the bone. Euro is trading at 1.14, up 9% this month pound has hit several months high gaining pre and post UK election from 1.455 to 1.58 as of today, while is continuing the range of 118.2-120.8.
Why yen remain such an underperformer?
- Yen is a key safe haven currency. Yen has gather pace when equity market sold off in last September, however this year equity market selloffs have so far failed to generate global risk aversion. Bund move resulted in some risk aversion, however that soon faded with sharp fall in yields last Thursday.
- On the other hand Bank of Japan massive quantitative easing is keeping the pressure on the upside, and BOJ has vowed to keep policy ultra-loose.
- Moreover low volatility in Yen is keeping it an excellent choice for carry trade, which is pushing downward pressure on Yen.
Yen is currently trading at 119.1, again rally was halted around 118.8 support area.
