- JPY safe-have status no longer in question

- JPY thriving in coronavirus market meltdown

- More gains ahead say MUFG

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The Japanese Yen is leading the pack ahead of the weekend, with the currency advancing against all its major peers amidst an ongoing liquidation of equity holdings in the face of the coronavirus outbreak and further gains are possible says a major Japanese bank.

The outbreak is now at a 'global' phase in that the concern has shifted from China - the origin of the outbreak - to other northern hemisphere nations. Expectations for a global recession are growing and investors are reacting by cutting exposure to stocks.

This has created a flow of funds into the Yen, which is seen as a traditional 'safe haven', while its qualities as a funding currency means it would appreciate as investors repatriate yen-based loans.

A look at the Yen's performance over the past week shows it has advanced against its major peers:

Above: The Yen's performance over the past month.

Analysts at Japan's MUFG Bank say the trend of appreciation for the Yen is likely to continue. In a note to clients issued Friday, Analyst Lee Hardman says the currency's 'safe haven' qualities have proven to be intact, despite the market questioning this status prior to the coronavirus meltdown.

A bout of Yen weakness leading up to February 20 saw the Dollar-Yen exchange rate surge to 112.23 on February 20, prompting "market participants to question the yen’s safe haven appeal," says Hardman.

The Yen appeared to have fallen victim to a combination of fears the Japanese economy could be about to enter a recession, a sharp improvement in global investor appetite and a technical breakdown in the market. Yet, a factor that was overlooked at this point was an ongoing rally in global stocks, a scenario that traditionally lends itself to JPY weakness.

"Up until that point global equity markets were still hitting new highs every day, but having since corrected sharply lower it has resulted in the resumption of normal service as the yen outperforms during periods of more intense risk aversion boosted both by the liquidation of funding positions and its safe haven appeal," says Hardman.

The Dollar-Yen exchange rate is currently quoted at 105.79, while the Pound-to-Yen exchange rate is quoted at 137.18, down 0.30%.

"The yen has continued to strengthen during the Asian trading session with USD/JPY hitting an intra-day low of 105.76 which is the lowest level since the start of September. The next key technical support level is provided by the August low at 104.46. A decisive break below would then open the door to a potential retest of the 100.00-level if coronavirus fears continue to intensify in the coming months," says Hardman.

The major theme for currency markets remains the coronavirus outbreak and the growing number of cases being recorded in western economies: according to Johns Hopkins CSSE, Italy now has 3858 cases recorded, Germany 545, France 423, the U.S. 233 and the UK 116.

"What was largely a Chinese issue just a month ago, has turned into a global crisis that threatens to throw the world economy into recession. The growth of the virus may have seemed relatively gradual outside of China, yet the growth in cases outside the country has actually been an incredible 6600% over that timeframe. We are at a tipping point, where a similar month of growth for the virus will likely spark a global panic and bring severe economic consequences that have yet to be realised," says Joshua Mahony, Senior Market Analyst at IG.