10-Q: Invesco CurrencyShares Japanese Yen Trust Reports Second Quarter 2024 Results

The Invesco CurrencyShares Japanese Yen Trust reported a net comprehensive loss for the second quarter of 2024, influenced by market volatility and the continued weakness of the Japanese Yen against the US dollar.

Summary

• The Invesco CurrencyShares Japanese Yen Trust is a grantor trust that aims to reflect the price of the Japanese Yen in US dollars.
• The trust reported a net comprehensive loss of $352,714 for the three months ended June 30, 2024, and a loss of $813,686 for the six months ended June 30, 2024.
• These losses are primarily due to the Sponsors fee and interest expense on currency deposits exceeding any interest income.
• The trust's assets primarily consist of Japanese Yen deposits held at JPMorgan Chase Bank, N.A., London Branch.
• The number of outstanding redeemable capital shares increased from 4,750,000 at the end of 2023 to 5,900,000 as of June 30, 2024.
• The value of the Japanese Yen has continued to decline against the US dollar, impacting the trust's performance.
• The trust does not engage in any activities designed to profit from changes in the price of the Japanese Yen.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the reported net losses and the continued weakening of the Japanese Yen. While the trust's operations are stable, the financial performance is concerning.

Positives

• The trust's disclosure controls and procedures were deemed effective.
• The trust has a clear objective to reflect the price of the Japanese Yen in US dollars.
• The trust provides a simple way for investors to gain exposure to the Japanese Yen.

Negatives

• The trust incurred a net comprehensive loss for both the three and six month periods ending June 30, 2024.
• The Japanese Yen has continued to weaken against the US dollar, negatively impacting the trust's value.
• The trust's interest rate on its primary deposit account is currently 0.00%.

Risks

• The trust is subject to fluctuations in the Japanese Yen/USD exchange rate.
• A decline in the Japanese Yen to USD exchange rate will adversely affect the value of the shares.
• The trust's assets are concentrated in Japanese Yen deposits held at a single financial institution, creating a concentration risk.
• Changes in interest rates set by the Depository can impact the trust's performance.
• Global economic and political events can impact the value of the Japanese Yen.

Future Outlook

The report does not provide specific forward-looking statements or guidance, but it notes that the trust's performance is directly tied to the price of the Japanese Yen and is subject to market volatility.

Management Comments

• The management of the Sponsor concluded that the Trust's disclosure controls and procedures were effective.
• The Sponsor is not aware of any known trends, demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, material changes to the Trusts liquidity and capital resources needs.

Industry Context

This report reflects the performance of a currency-based exchange-traded fund (ETF) in a period of significant currency fluctuations, particularly the weakening of the Japanese Yen against the US dollar. This is a common challenge for currency-based ETFs, as their value is directly tied to the underlying currency's performance.

Comparison to Industry Standards

• The Invesco CurrencyShares Japanese Yen Trust (FXY) is comparable to other currency ETFs such as the WisdomTree Japanese Yen ETF (JYF) and the ProShares UltraShort Yen (YCS).
• FXY's performance is directly correlated to the JPY/USD exchange rate, similar to other JPY-tracking ETFs.
• The expense ratio of FXY is 0.40%, which is within the typical range for currency ETFs.
• Unlike some leveraged or inverse currency ETFs, FXY aims to provide direct exposure to the Japanese Yen without derivatives, which is a common approach for many currency trusts.
• The trust's structure as a grantor trust is a standard approach for currency ETFs, ensuring transparency and direct ownership of the underlying currency.

Related Party Transactions

• The Sponsor, Invesco Specialized Products, LLC, is a related party of the Trust.
• The Trust pays the Sponsor a Sponsors fee, which accrues daily and is paid monthly.

Stakeholder Impact

• Shareholders are impacted by the net losses and the decline in the value of the Japanese Yen.
• The trust's performance directly affects the value of the shares held by investors.
• The Sponsor receives a fee for its services, regardless of the trust's performance.

Key Dates

Keywords

Japanese Yen, Currency Trust, Exchange Rate, Invesco, FXY, Net Asset Value, Foreign Exchange, Grantor Trust