This protection asset has a superior performance, because the pound and euro face the wind against Brexit and the Italian budget crisis.
The yen is expected to end the year as the biggest winner against the dollar among major currencies, as investors seek security amid 2018 uncertainty.
Protection assets have a superior performance, because the pound and euro face winds against Brexit and the Italian budget crisis, while commercial wars between the United States and China and falling prices Oil pressure on commodity-related counterparts, such as the Canadian dollar. The yen rose more than 2% this year to 110.04 yuan per dollar in London on Monday. Meanwhile, the share of Japanese currency in global reserves increased to 5% in the third quarter, the highest in 16 years.
If headwinds continue in 2019, the yen could "win by default" to face a fourth year in running its annual income against the dollar, said Shahab Jalinoos, global head of currency trading strategy at Credit Suisse Group AG.
"News in Japan is less negative than elsewhere, at least related to initial expectations, in 2018," Jalinoos said in a telephone interview. "And that allows the yen to play the role of a kind of safe asset within one year which is generally negative for risk assets."
This year, the yen rose amid a weaker dollar from the start, but returned profits after the dollar changed conditions in April. After touching the weakest level this year against the dollar in October, the yen strengthened in December amid volatile equity markets.
In the absence of factors that can inspire investor confidence in risk assets and global growth in 2019, Jalinoos hopes the yen remains a favorite. The median forecast for the Bloomberg survey is to predict a stronger yen to around 109 per dollar by the end of 2019.
However, Marvin Barth, from Barclays Plc, said the Japanese currency could get even more, at 107 yen per dollar by the end of 2019. Advances in the yen next year will come when investors concentrate on dollar risk and seek diversified sources in the Japanese currency, he said .
"The yen is very undervalued from a long-term historical perspective," said head of macro research and emerging markets Barclays in a telephone interview. Estimates of 107 are not "big appreciation in yen, but outperform other currencies."
Jingyi Pan, Singapore-based market strategist at IG Asia Pte, echoed the forecast for a stronger yen in 2019.
"With a range of concerns that include uncertainty about the growth prospects that are expected to continue, residential trade can remain profitable," he said. "The possibility of a break from the Fed's upward cycle now can see yield differentials help the yen in the next stage, something that has been absent in the past two years."