IT'S THE MARKETS, JAKE!

What is Asia's best performing currency? The answer is the same one up 11% through last week  against the U.S. dollar--the Japanese yen.

Like a lot of things, that wasn't suppose to happen. To paraphrase a line from a classic film, some might conclude: "It's the markets, Jake!" Japanese officials--Abernomics, in short--have been twisting their monetary spigot open for so long with such force their hands should be fatigued if not their resolve.

Don't get confused, the markets get moved by what some call external factors. But Japanese officials have not been reluctant to intervene to soften the yen. And the recent and surprising reversal of the Federal Reserve's posture hasn't helped Japanese officials. In fact, it's more of a clear sign central bankers are focused on China and it's problems.

Meanwhile, investors and market pundits are being forced to refocus on they're expectations for the yen in 2016. The European bank situation isn't helping either. Higher U.S. rates would've provided some cushion for the yen, relieving some of it's pressure as a safe haven stop for concerned investors.
That could still happen, but perception often trumps an actual dose of reality down the road.

And that raises another question: What if any validity does negative interest rates strategy have left with investors?  Covenants in the trans-Pacific trade agreement reportedly forbid a nation from weakening its currency to improve its trade. Though agreements hardly are written in stone at meetings like the recent G20 when officials return home, industrial and developing nations at the recent gathering in February agreed not to start a currency war if growth slows further.

If we had to guess, we think the yen's rise might go through a brief head fake owing to the above before going higher. Maybe even much higher. Like we said above: "It's the markets, Jake," And it wasn't suppose to happen.