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The Japanese yen was easily the strongest of the majors over the past week, rallying nearly 7 percent against the New Zealand dollar and over 4 percent versus the euro, Australian dollar, and Canadian dollar. The yen’s gains were not as extreme against the US dollar, though the 2 percent drop in USDJPY is nothing to laugh at. Ultimately, broader trends suggested that 1) risk aversion made a big comeback and 2) both the US dollar and Japanese yen have maintained their “safe haven” status. Indeed, the CBOE’s VIX volatility index, one of the prime “market fear” gauges, rose above 30 for the first time since July, which may indicate that the shift in sentiment may extend into the weeks ahead.

That said, the moves we saw in the Japanese yen crosses were nothing short of extreme, which may warrant some caution at the start of this coming week, as the majors could see a bit of a consolidation period. At the same time, event risk for currencies like the Australian dollar, US dollar, euro, and British pound will be very high ahead of a few rate decisions, which will only exacerbate changes in investor sentiment and thus, FX carry trades.

Japanese-specific news will be quite limited. First, the minutes from the Bank of Japan’s latest policy meeting could add to optimism that the economy is in the process of recovery, especially since we already know that they’ve decided to allow their liquidity programs to expire, as planned, in December. Next, Japan’s leading economic indicator is projected to rise to 86.2 for the month of September from 83.2, which would mark a one-year high as well as the sixth month of improvement. Likewise, the coincident index is forecasted to rise to a 10-month high of 92.5 from 91.2, all of which would reaffirm the BOJ’s more optimistic stance on growth. All told, traders looking for a harbinger of Japanese yen strength or weakness may prefer to look toward broader risk trends, as fundamental forces have yet to truly play any role in the currency’s moves.