ETFs to Watch on Japan's First Yen Intervention Since 2022
Written by Emily J. Thompson, Senior Investment Analyst
Source: NASDAQ.COM
Currency Intervention by Japan:
- Japan conducted its first currency intervention since October 2022 to stabilize the yen following a decline to a 34-year low in April.
- The Ministry of Finance spent 9.7885 trillion yen (approximately $62.25 billion) from April 26 to May 29 to support the yen.
- This move aimed to "smooth out" excessive fluctuations in the currency market and strengthen the yen against other currencies.
Impact on Exporters and Equity Markets:
- A stronger yen can challenge Japanese exporters as it makes their goods more expensive and less competitive abroad.
- The intervention may pressure the broader equity market, affecting large-cap Japanese stocks and currency-hedged ETFs negatively.
- Small-cap stocks tied to the domestic economy could perform better in a rising currency environment.
ETF Recommendations:
- Invesco CurrencyShares Japanese Yen Trust (FXY) is expected to gain value in the near term due to the intervention.
- Investors should consider regular ETFs like iShares MSCI Japan ETF (EWJ) over currency-hedged ones like WisdomTree Japan Hedged Equity Fund (DXJ).
- Small-cap ETFs like iShares MSCI Japan Small-Cap ETF (SCJ) and WisdomTree Japan SmallCap Dividend ETF (DFJ) with a Zacks Rank #2 (Buy) could be beneficial in the current scenario.
Analyst Views on FXY
Wall Street analysts forecast FXY stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for FXY is USD with a low forecast of USD and a high forecast of USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
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About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
