How Discussion of the Alt-Right Explains Moves in the Yen

Donald Trump’s victory in the US presidential election has triggered ripples of volatility across multiple venues all over the world. Japanese equities have plummeted then recovered, hate crimes and racist attacks are on the rise throughout the US, and pain for the Mexican peso has been unrelenting. Who else but Trump could generate volatility in both the digital conversation about the “alt-right,” a catchall term for the hard-right, white nationalist political movement that has emerged as a key source of support for the president-elect, and the yen-dollar currency pair?

While the multiplication of volatility’s strange new bedfellows has been widely noted, the statistical connections between them remains little explored. Might shifts in the volatility of online discussion about the alt-right presage movements in currencies sensitive to major changes in US domestic politics? We generated a “best fit” to measure the extent to which our overview signal for the US alt-right, which brings together close to 100 web pages capturing the political movement’s major actors and institutions, guiding texts and defining controversies, accurately predicts big daily moves in JPY/USD.

The two signals in orange above express, broadly speaking, the level of likelihood of a major move in the yen over the coming 7 (bright orange) and 14 (light orange) days. The signals are direction-agnostic: they don’t show which way the move is likely to go, but function instead as a general barometer of future volatility. As you can see, the signals have spiked over the last week, suggesting there’s a sharply rising likelihood that the yen will see a big move in the next 7–14 days. The last two times there were spikes of a similar magnitude, on May 29 and July 23, a yen move followed — on June 2 and July 28, respectively.

Interestingly, two of the individual sources within these “best fit” signals that have historically been among most accurate predictors of major yen moves are the English-language Wikipedia page on The Turner Diaries and the German-language Wikipedia page for Breitbart News. The Turner Diaries is a jauntily racist and anti-Semitic novel published in the late 1970s which serves as a kind of bible for the alt-right: it ends with a white nationalist militia wiping out all non-white peoples off the face of the earth. Breitbart News, of course, is the media company run by Steve Bannon, the Trump administration’s rumpled gadfly and chief strategist-in-waiting. Activity on the Turner page has been subdued in recent days, but discussion in German about Breitbart News — as measured by Predata’s signal for the Wikipedia page — just reached its second highest level ever.

To make the obvious point: these “best fit” signals do not mean that fluctuations in the alt-right’s digital profile cause the yen to move. They simply put flesh on the hypothesis that the far right’s disruption of the political establishment in the US has generated waves across global markets — and that the digital expression of this disruption, once quantified in the form of Predata’s signals, suggests there are more waves to come. Globalization promised a world of ever-greater interconnectedness. As the US and other advanced economies spurn globalization and turn inward, the connections between all things only multiply. ⏪