The Japanese yen gained yesterday and extended its rally today as some Japan’s politicians were speculating that the recent huge drop of the currency was overdone. The yen was also strong on negative fundamental reports from the United States and Europe.
Japanese Economics Minister Akira Amari warned that the weakness of the yen may be not entirely positive for Japan’s economy. Amari said yesterday:
If the yen excessively weakens, this would cause a spike in import prices. It would be a benefit for exports, but would have harmful effects on peopleâs livelihoods.
Such comments spurred talks that the depreciation of the Japanese currency will be limited.
Some negative data added risk premium to the yen. The German economy shrank 0.5 percent in the fourth quarter of 2012 from the previous quarter. The Empire State Manufacturing Index was almost unchanged at -7.8 this month, still indicating a decline of the sector, while analysts have anticipated an improvement to 1.9.
USD/JPY dropped from 88.78 to 88.33 as of 2:57 GMT today and its intraday low was at 88.04. EUR/JPY declined from 118.10 to 117.34 and GBP/JPY went down from 142.61 to 141.87.
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