JPY Daily News

Yen Falls to One Week Low Against the Dollar

The Yen fell to a 1 week low versus the Dollar, and also declined against the EUR, as some investors returned to carry trades, selling low-yielding currencies and using the proceeds to buy higher-yielding assets. This comes about as the Bank of Japan (BoJ) cut its benchmark Interest Rate last week to 0.1% from the previous 0.3%. Apparently the market has pulled back from extreme risk aversion levels at the expense of the Japanese currency. The JPY declined 0.7% to 90.87 against the Dollar, and also declined 0.9% to 126.92 vs. the EUR; following a 1.3% loss on Monday's trading.

The Japanese Yen has gained 24% against the Dollar this year, heading for its largest annual increase in more than two decades amid speculation that the credit crisis will deepen. According to analysts the JPY is likely to continue depreciating as the market moves away from extreme risk-averse tones into more safe assets. On Tuesday, the JPY drifted lower against the USD, as investors continued to lock in profits on the Japanese currency's recent steep gains, cautious not to push the pair lower in case Japan's government intervenes.

Japan, which is battling a recession, is concerned with stemming the appreciation of the Yen in order to protect the competitiveness of its exports. Analysts' prognosis is that the risk for now is a less than prior the rate cut, because the Dollar is above 90 Yen. Therefore intervention from the Bank of Japan seems to have worked. However, traders as a whole are not willing to push the Dollar lower, and this is likely to support a further decline in the Yen.

Current Time: 05/27 04:16 GMT

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