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Asset Class ETF Interactions with the Yen

Steve LeCompte | | Posted in: Currency Trading, Economic Indicators

Key Insight

Yen strength correlates negatively with U.S. equities but positively with TLT and GLD contemporaneously, with weak predictive power for next-month returns (Mar 2007–Jul 2019; monthly frequency; in-sample).

How do different asset classes interact with the Japanese yen-U.S. dollar exchange rate? To investigate, we consider relationships between Invesco CurrencyShares Japanese Yen (FXY) and the exchange-traded fund (ETF) asset class proxies used in the Simple Asset Class ETF Momentum Strategy (SACEMS) or the Simple Asset Class ETF Value Strategy (SACEVS) at a monthly measurement frequency. Using monthly dividend-adjusted closing prices for FXY and the asset class proxies since March 2007 as available through June 2026, we find that:

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