[TOKYO] Nomura Holdings Inc says investors have lost faith in the Bank of Japan's ability to weaken the yen.
Japan's biggest brokerage sees the evidence in the yen- gold correlation, which has surged to the highest since 1978 amid the global scramble for haven assets following the UK vote to leave the European Union. What has made the relationship so tight, according to Nomura, is the central bank's introduction of a negative interest-rate policy in January, which weakened the Japanese currency for only one day before it resumed its march higher, reaching 99.02 per dollar last month for the first time since 2013.
"Gold is a currency with no central bank, so if you simply want to sell the dollar, the easiest way is to buy gold," Yunosuke Ikeda, Nomura's head of Japan foreign-exchange research, said in an interview Wednesday.
"Investors have become extremely skeptical about the efficacy of BOJ policy and its impact on the exchange rate, so now the yen is the same as gold." The strong yen threatens to undo the effects of the stimulus BOJ Governor Haruhiko Kuroda launched in April 2013, when the currency was trading around 93 per dollar. His 2 per cent inflation goal remains elusive, after a key gauge of consumer prices sank for a third month in May.
The yen was around 101 per dollar on Thursday in Tokyo, after a 19 per cent rally this year, vying with Brazil's real as the world's best performing currency. Gold has climbed 29 per cent in 2016 to around $1,367 per ounce.
The 60-day correlation between gold and the yen rate against the dollar stands at 0.73. A reading of 1 would mean the securities move in lockstep, while zero indicates no relationship.