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JPY Daily News
Bank of Japan now under Pressure to Reduce Interest Rates
The sudden reduction in U.S. interest rates yesterday has many analysts forecasting that the chances the Bank of Japan (BoJ) will cut its rates this Friday has increased. With the lowest global interest rate for the past 7 years, Japan has intentionally held down the value of the Yen by making it the currency of choice for funding carry trades.
However, now that global interest rates are being slashed, the value of carry trades has vanished and traders are buying back into the Yen. As such, Japanese exports have taken a hit, which is pushing its economy into a deeper recession. To stabilize its economy and return to a period of growth, the BoJ may indeed have to decrease its rates this Friday to as low as 0.10%.
Traders should be aware of the effects the U.S. rate cut will have on the Japanese economy. As of this morning, stocks have increased and the JPY has grown in value. If this pattern continues without a rate cut from the BoJ, forex traders may actually see the Yen reach record highs against most other currencies.
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