Investors Flock to Yen
With the global economy in chaos Forex investors flocked to the Japanese Yen amid speculation that US lawmakers will fail to bailout the struggling auto industry. There is widespread political opposition to the auto bailout and investors were quick to take advantage of the Forex opportunity that market conditions provided.
Fx Opportunity and the Yen
The Yen also gained against the Australian dollar and the British Pound as fears of a global recession caused Asian markets to slump. Many FX traders think it is unlikely that the US congress will take action this year to bailout automakers. The Yen is providing Forex opportunity because of Japan’s low interest rates. Japan’s rated now stand at 0.3% compared with 3.25% in Europe and is lower than any other nation.
Yen Advances Against the Dollar
In the last three months the Yen has advanced 14 percent against the dollar, 33% against the Euro, and 53 percent against the Australian dollar. Aside from the US dollar the Yen has provided investors with Forex opportunity that other currencies cannot match.
Japan Gives Advice to the US
Japan’s Vice Finance Minister for international affairs Naoyuki Shinohara said in a speech that the US should reduce trade and budget deficits to support the dollar since it is the world’s reserve currency. It is thought that the US will suffer a catastrophic collapse if US automakers fail and could result in the loss of three million jobs nationally. It is also estimated that the US government would suffer revenue losses of $156 billion if the automakers are allowed to fail.
Fed to Cut Rates Further
The dollar may decline due to government reports showing the housing recession is deepening and may cause the Federal Reserve to cut rates further. Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France’s second- largest bank stated, “The reports are likely to indicate the U.S. economy is deteriorating further. The Fed may cut rates more. It’s negative for the dollar.”
Dollar May Fall
Some economists are predicting a decline of the dollar on Forex exchanges and the dollar may not provide the FX opportunities it has in the recent past. According to Masahoro Sato, general manager in Tokyo of the treasury division at Mizuho Trust & Banking Co, “The dollar may face some selling pressure. Traders will look for any signs of crisis at the Fed or anything that suggests rates will fall further.”
Dollar and Yen Continue to Provide FX Opportunities
For now both the dollar and the Yen continue to provide traders and investors with Forex opportunities. Throughout the economic crisis the Dollar and the Yen have performed well despite economic indicators from Japan and the US. The world faces an unprecedented economic crisis and FX traders and investors will be watching markets with an intensity not seen in years.
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