Posts Tagged ‘japanese currency’

The outlook for US Dollar have been going down, down and down against the Yen. Is it time for a turn-around soon?

New Economic Slowdown?

After the latest key U.S economic data was released, investors was first seriously concerned about the US economy showing, when July showed 27 % slowdown of previously owned U.S homes. But later, many forex investors insted became worried about the world economy instead and dollar started to rise again against many major currencies.

At the same time, Nikkei 225 rose to a 15-month low, while the Japanese currency become even stronger – 84 yen per USD. Yen is currently at its strongest value against USD this decade. Lets see how things move forward in the end of the week.

Japanese currency are becoming more interesting for carry traders, while forex experts estimate a set-back over the next months.

Yen as a carry trade

During much of the beginning of the century, yen was the main carry trade currency among international forex investors and traders. This mean it was sold by investors because its yield was so negligible, and the proceeds were invested in higher yielding currencies, such as Australian dollar (AUD) or Sterling (£). However, in the middle of the financial crisis, the yen was displaced by the US dollar, in the light of the slashed American interest rates.

Shift in lending rates

It’s now cheaper to borrow money in Yen then (more…)