Yen plunges as safe havens lose their appeal

President Putin’s comments that force would only be used as a last resort have reversed yesterday’s scrabble for assets perceived as less risky, depressing the Japanese yen to a two-week low against the US dollar.

The Japanese yen’s gains yesterday were tied to the ratcheting up of tensions between the West and Russia. Correspondingly, today’s drop in the value of the yen come after those tensions eased in light of Russian President Vladimir Putin’s remarks that suggest no immediate escalation.

‘As for bringing in forces, for now there is no such need, but such a possibility exists,' Mr Putin said. ‘What could serve as a reason to use military force? It would naturally be the last resort, absolutely the last.’

By mid-afternoon in New York, USD/JPY had risen 0.73% to 102.18, the biggest decline in the yen since 18 February. Though the stock market has pushed to new highs and safe havens such as the yen and gold have plummeted in value, indicative of investor confidence, the market remains exposed to headline risk and volatility could easily return.

This situation is far from over: Nato and Russia are due to hold talks tomorrow, while Nato General Secretary has accused Russia of continuing to ‘violate Ukraine's sovereignty and territorial integrity.'

President Obama said Mr Putin is not ‘fooling anybody’, while John Kerry said the US condemns ‘the Russian Federation's act of aggression’, adding that ‘It is clear that Russia has been working hard to create a pretext for being able to invade further.’

The Russian military said it has launched a test ICBM near the Caspian Sea. The timing of this will not help calm nerves.

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