Japanese yen rises on falling equity markets

04-07-2009 15:42

The Japanese yen went up against all main currencies today as a result of yesterday’s fall in equity markets and due to the prospects that today’s session will remain bearish. Following the decline in risk appetite, the euro fell versus the US dollar and dropped below 1.3300 after the final Gross Domestic Product (GDP) reading for the last quarter implicated that the financial crisis in Europe may deteriorate.

Low-yielding currencies are rising

During the past two weeks the emerging and developed equity markets showed a significant growth, which was the main cause for the high-yielding currencies to rally. The yen is one of the low-yielding currencies on the Forex market and these currencies begin to rise as a result of erasing investors’ optimism and due to a possible correction, proved by the technical analysis theories.

Traders expect more losses financial institutions

Markets already expected the unchanged interest rate by the Bank of Japan today as the limited quantitative easing notifications proved the definitive increase of the attractiveness of the Japanese yen. Traders forecast that global financial organizations will announce additional losses and that the present measures will not sufficient to resolve the financial crisis properly. In these circumstances currencies such as the euro will be crushed by the Japanese yen. According to analysts the downfall worldwide may end within a week and for that reason they advise to enter long positions on the yen cautiously.