Foreign Exchange: Yen Stronger?

There has been significant gains on the yen on Friday as hit its first 2 ½ year high on the euro. It is said to be caused by the increased demand of the Japanese currency as equities and crude oil swayed yet again.

The euro dropped to 125.47 yen, which is its lowest since June of 2013. The dollar, on the other hand, fell 0.4% at 112.83 yen, slowly going back to its 15-month low on record at approximately 111.00 last week. While the green currency almost went up to 115 on Tuesday, it was poised to lose by 0.4% later in the week.

According to several expert traders, a drop in oil prices had caused the concerns in equity markets that prompted a flight back to safety. Japan’s Nikkei was previously down over 2 percent.

As the euro changed at $ 1.1119 after being on a 2-week low of $1.1071, it has lost 1.2% on the week.

Masashi Murata, a senior currency strategist at Brown Brothers Harriman in Tokyo, said, “I think the euro has further downside. The currency faces political risk as economic woes and the refugee crisis clouds the EU’s future.”

Although the European Central Bank may implement further monetary easing to protect the euro, the result of this loosening may likely be short lived, says Murata. The minutes from the European Central Bank’s meeting last January showed that some policymakers have been advocating for actions that has to be taken as new threats arise.

On the contrary, the San Francisco Fed President John William said that the US central bank must stick to its plan in gradually raising interest rates. He also added that his outlook changed only a little since last December.

The diverging policy pathways among major central banks were thought to be the cause for the heightened market volatility.

The Australian dollar fell as John Edwards, a board member of the Reserve Bank of Australia, has told the Wall Street Journal that it was too high. Aside from that, there are also a number of risks arising as other central banks have also implemented negative interest rates.

The Australian dollar was down by 0.8% at $0.7098. It dropped to a 7-year low of $0.6827 in mid-January when there was sharp deterioration of the global risk sentiment. However, it crept higher ever since.

Meanwhile, the pound was up 0.1% at $1.4335 as it pulls further away from Wednesday’s trough of $1.4235.

Let Your Friends KnowShare on Facebook0Tweet about this on TwitterShare on Google+0Share on Reddit0Share on LinkedIn0