Yen Drops vs. Dollar

The Japanese Yen fell to a two week low against the dollar as investors see signs of economic recovery. Currency exchange rates are affected by changes in risk sentiment and recent signs of recovery have put pressure on safe haven currencies such as the US dollar and Yen.

May Day Weekend Trading Thin

Currency exchange rates were also affected by the May Day holiday and trading is expected to be limited as Asia and Europe celebrate the May Day holiday. The dollar to yen rate was also affected by data showing a four year high in unemployment and a second round of deflation. In Asia Chinese manufacturing increased and South Korea shows signs of recovery.

Confidence Spreading

The Japanese Nikkei exchange was trading 4% higher affecting the dollar to yen exchange rate. The current dollar to yen rate stands at 99.16 while the euro to yen exchange rate is 131.06. Toru Umemoto of Barclays Capital in Tokyo stated, “This confidence is spreading in the equity markets and risk appetite is growing more and more. As a result the yen is sold broadly. Investors are seeking a growth gap and a rate gap and as a result the yen is a funding currency.”

Risk Appetite Vulnerable

Risk appetite has been bolstered by economic data from the US that showed higher US manufacturing and declining unemployment. The news of US auto manufacturer Chrysler’s bankruptcy filing failed to have any affect on currency exchange rates.  Risk appetite is seen as vulnerable due to ongoing concerns over a possible flu pandemic.

Investors Wait For Stress Tests Results From US

Currency trading is expected to be light over the holiday weekend and investors are wary in advance of the results of US bank ‘stress tests’ due Monday. If US banks fail the stress tests and need more capital risk appetite could take a drubbing as currency traders scramble for safe havens.

Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate.  In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.