Investors across the globe have been closely monitoring the
Syria issue and the likelihood of a military attack by Western
The U.S. President Barack Obama and other Western powers were
mulling over a military action to punish the Syrian regime's use of
chemical weapons on civilians, while Russia promised to support the
Middle East nation (read:
Defense ETFs to Watch as Syrian Worries Build
). This fear heightened instability in the Middle East and has
largely impacted U.S. stock prices as of late.
However, recent reports indicate less chances of the U.S.-led
military action, encouraging investors to recycle their exposure
from safe haven to high-yielding securities.
As Syria President Bashar al-Assad accepted Russia's proposal to
give up its chemical weapons under international control, Obama
immediately put the strike on hold asking Congress to postpone
their votes for the time being. However, Obama also urged the U.S.
military to be prepared for attacks if needed, so this crisis may
not be over yet.
While the entire situation remains unclear at present, the Western
involvement in Syria's civil war seems to have taken a back seat,
reducing the risk of wider conflict and in turn, dulling the demand
for the traditional safe haven currencies like Japanese Yen. The
currency fell to a multi-week low against both U.S. dollar and Euro
(see more in the
Last week, encouraging Chinese retail sales and industrial output
data added to the bearish sentiments for the safe haven currency.
Further, the fall in the currency was supported by Tokyo's
successful bid to host the 2020 Olympics and
Japanese growth in the second quarter (read:
Japan ETFs Surging, Is the Country Back on
Winning the Olympics bid will no doubt inject optimism into the
Japanese economy and its stocks, but has already taken a toll on
the Japanese yen. Since the past few months, Japanese stocks and
currency have been moving in the opposite direction.
According to the Tokyo bid committee, hosting the Olympics would
beef up the economy by about 2.96 trillion yen ($30 billion) over
the next seven years, but would continue to put pressure on its
Moreover, the currency continues to soften on the growing prospect
of the Fed curtailing its stimulus anytime soon as U.S. economy
growth continues to pick up at a faster pace.
The chain of news and the slump in yen has made trading difficult
for Japanese currency ETFs over the past ten trading days (see:
all the Currency ETFs here
CurrencyShares Japanese Yen Trust (
lost more than 1.53% over the past ten trading sessions and is down
nearly 10% in the year-to-date time frame. The fund tracks the
movement of the yen relative to the U.S. dollar, net of the Trust
expenses, which are expected to be paid from the interest earned on
the deposited Japanese yen.
The product charges 40 bps a year in fees. Additionally, the ETF
sees a good volume of more than 555,000 shares per day and
accumulated $118 million in its asset base.
The other product -
iPath JPY/USD Exchange Rate ETN (
- was down as well in the last ten days and has lost double digits
in the YTD frame. The note provides exposure to the Japanese
yen/U.S. dollar (JPY/USD) exchange rate. This means that when the
Japanese yen appreciates relative to the U.S. dollar, the JPY/USD
exchange rate increases and the value of the ETN increases and
Japanese Yen ETF Investing 101
The product is unpopular with AUM of $1.8 million and average daily
volume of just under 1,000 shares. The ETN charges investors 40 bps
in fees per year.
Obama's postponement could prevent a broader war in Syria, dodging
the wider prospect of attack on neighboring nations. However, the
easing of the Syria conflict not only has a negative impact on
sectors like oil and gold, it also puts pressure on safe havens
Safe Haven ETFs Slide as Syrian Tensions Cool
We expect these two safe haven currency ETFs to continue struggling
in the days ahead because of the Olympics fever and chances of
Syria avoiding a Western-led war. Both the products have a
Zacks ETF Rank of 4 or 'Sell' rating, suggesting the pain to
largely continue to close out the year as well.
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CRYSHS-JAP YEN (FXY): ETF Research Reports
IPATH-JPY/US EX (JYN): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
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