Due to Bank of Japan’s Policy Initiatives, Yen Falls for the 3rd Day vs. Dollar

On Friday, the Yen fell for the third consecutive day versus the dollar.  Bank of Japan (BoJ) continues to ease its monetary policy and this is supposed to contribute to the currency’s fall for the third straight day. This is Yen’s worst weekly loss that the currency has suffered since mid-February. Because of BoJ’s policy, the yen continues to lose the market appeal.

The dollar manages a record high versus yen to reach 81.38 yen on Friday. However on Thursday, the U.S. currency recorded its six and half month high of 81.45 yen. Both the currencies the dollar and the yen traditionally maintain a strong correlation. The move of one currency could have seen affecting the market position of the other.

On the other hand, the dollar is all set to march ahead for its record best against the yen since the last June. This week, the dollar marked a 2.3 percent jump versus the yen. The political developments in Japan are supposed to bring a favorable environment for dollar’s movement. On Friday, the lower house of parliament in Japan was dissolved, and the Prime Minister of Japan cleared the route for a snap election to be scheduled on 16th December.

The leader of Japan’s main opposition party Liberal Democratic Party, Shinzo Abe is being seen as the next leader of the country. Abe is in favor of adopting zero interest rates with a view to spur lending and he is likely to instruct the Japanese central bank to take steps in this direction.

Many market analysts feel that the dollar may inch closer to 82 yen, if BoJ further eases its monetary policies. The Japanese central bank has a meeting in the next week and such a move is expected from the bank. This expectation of BoJ’s continued easing is restricting the yen to strengthen its market position.

Away from Yen/Dollar developments, the euro continues to shift downwards over the Greek debt concerns. ECB’s Weidmann has showed his concerns over Greece’s inability to take decision in the right direction. The stagnant European economy is supposed to be another reason for the currency’s downward drift.

The yen, which was once supposed to be a safe currency in times of uncertainties, now continues to lose its market appeal. Some investors who have short-term market goals will probably try to take profits after the currency’s such big moves, whereas longer-term investors will continue to sit on their positions and will keep expecting a rise in the currency’s market position.

In the last two days, the currency has witnessed big moves in the market and the trend is expected to continue moving higher, in the wake of the BoJ’s further easing of the nation’s monetary policy.

The dollar is seen gaining significantly in the last couple of days, and gaining a safe-haven status, in a scenario where the yen is plunging continuously and the debt concerns in the euro zone are deepening further. However, the US policymakers are also much concerned about the rising debt and deficit that may draw the US economy back into recession, once again.

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