Yen at One Year High vs. Euro

The Japanese yen has been a big winner during the recent flight to safe haven assets and currencies. The yen is now at a one year high against the troubled euro after news of a possible Greek downgrade sent investors and traders scurrying for safe haven. The Yen gained on all 16 major currencies after Standard & Poor’s and Moody’s Investors Service said that Greece’s rating could be downgraded as early as next month. Omer Esiner of Travelex Global Business Payments stated, “There’s a rush to cover short positions in yen when there’s a spike in economic uncertainty. “Sovereign credit concerns are keeping the markets in check. Higher- yielders are trading sharply lower.” The yen gained 1.5% vs. the euro trading at 120.24 per euro and against the US dollar the euro traded at $1.3525. The euro has fallen 2.5% against the dollar in February and is headed for a third monthly loss against the greenback.

Greek Debt Crisis Threatens EU

Greece’s debt problems continue to threaten the EU and the experts say that a bankruptcy in the euro zone could threaten the European Monetary Union. Carl Heinz Daube the head of Germany’s debt agency stated, “If one member were to go bankrupt this would mean, after 10 years, the euro experiment is at its end.” Daube also said that a euro zone nation bankruptcy would cause “a collapse of the whole system.” Despite widespread opposition to aid for Greece in Germany and the Netherlands the EU is expected to act if the integrity of the euro is threatened. Former ECB Chief Economist Otmar Issing said that giving aid to Greece would “open the flood gates” for other EU nations to seek financial assistance.

Bernanke Offers Sober Assessment of US Economy

On Wednesday Fed Chairman Ben Bernanke told the U.S. House of Representatives Financial Services Committee that a weak labor market and tame inflation require low interest rates for “an extended period.” Bernanke offered a sobering assessment of the US economy despite strong sign of growth. The US has lost over 8 million jobs since the recession began and Bernanke said that even though job losses are abating unemployment continues to plague American workers. Bernanke stated, “Notwithstanding the positive signs, the job market remains quite weak.” Bernanke said that the Federal Open Market Committee (FOMC) is prepared to support the US economy with emergency stimulus measures for the foreseeable future. Bernanke also told congress that “The FOMC continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”