Another down day in the markets with gold spiking and oil down in the commodity space. Currencies are also running the usual flight to safety, with the Yen making huge gains. This seems to be due to the concerns of the Fed after Yellen testified (she will speak again today) and didn't provide a clear answer that the market liked. Her tone was more dovish and her speech did take into account global events. Perhaps the markets were looking for a more concrete decision to push back another rate hike. Whatever the outcome from today's testimony, the larger trend of central banks will continue to be a trigger for volatility as some are pushed towards more interventions as others try to refrain.
The BOJ has commented on the rise in the Yen, and that was before the surge we have seem in the past week alone. Seeing the YEN outperform as a flight to safety currency comes from the relative safety that the BOJ is not in a position to add more stimulus because of the split decision for the rate cuts in the last meeting. This paralysis is making buyers of the Yen fairly confident (at least in the near term) that the fear of a currency war will keep the BOJ on hold. I move by the central bank however, would spur a sharp weakening as a policy floor will have seemed to be put in place, most likely 5% higher than we are today.
Bloomberg Dollar index
All things being equal, a drop in the dollar index should be a boost to the price of commodities, such as oil. Showing how all things are not equal, is the drop in the dollar index as dampened rate expectations from slowing growth have investors looking of other places to put their money in line with the drop in oil prices from the slowing expectations from slowing growth. With so little working it makes sense to see certain asset classes like the Yen and gold get so much attention. But the disappointing policy language we have been seeing as of late could also surprise and spur more resolve by central bankers to take action.