Monday, 13 Jul 2009

USD and JPY Maintain Strength

The Yen and Dollar continue to strengthen today against their major currency pairs as stocks continue to decline spurring demand for the safe haven status of the Japanese and U.S currencies. The Yen and Dollar are expected to stay firm throughout the trading day as investors stay cautious ahead of the second quarter earnings season which is likely to show mostly poor results.

While the EUR gained slightly against the Dollar following ECB president Trichet's speech, reaching a high of 1.3989, it's been having difficulties maintaining the gains, signaling it might have been a knee jerk reaction to the news rather than an actual change in direction.

The British Pound is experiencing some gains against the USD after hitting a low of $1.6034 following reports by the Sunday Times that Lloyds Banking Group Plc may report as much as 13 billion pounds ($21 billion) of new losses. However, as with the EUR it is unlikely that the recent gains signal a reversal in trend rather than simply a correction of the recent drop.

The JPY continues to be the main winner from the recent return to risk aversion as it continues to gain against its riskier counterparts. The Yen was further helped today by the continued declined in world equities and commodity prices, spurring skepticism about the global economic outlook and turning investors to the safety of the Japanese currency.