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Traders retreat to the JPY for risk aversion following the USD's bearishness
Yesterday, the JPY saw bullish trends against most of its major counterparts with the help of renewed concerns of the U.S. financial system, which caused an avalanche on carry trades. The JPY strengthened from mounting risk aversion as heightened fears in the American financial sector prompted investors to sell dollars. In early trading in New York, the USD was down 1.3% vs. the JPY at 108.35, and the EUR was down 0.5% vs. the JPY at 161.08.
Yesterday, during the Monetary Policy Meeting Minutes, the Bank of Japan warned about further rise in global inflation caused by a rise in international commodity prices. Also, another factor of the crisis which the board members pointed to is a slowdown of the U.S. economy and disruptions in the global financial markets. They also warned about further deceleration of exports, which have supported the recovery of the Japanese economy in recent years.
Today, there is no economic news expected to be released from Japan, however, we should see active JPY trading in response to key U.S and Euro-Zone data releases. The near term outlook for the JPY remains quite bullish as a U.S. economic redemption is unlikely to occur anytime soon. Therefore, traders are advised to follow U.S. data and Euro-Zone news with extra precaution today as they will mark future's JPY behavior.
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