Yen and US Dollar fall on forecasts and speculations

06-24-2009 08:09

The Japanese Yen dropped today on the outlook by the Organization for Economic Cooperation and Development (OECD) which forecasted a not expected increase for the OECD nations, driving demand for high-yielding investments. The Greenback lost today versus currencies like the Aussie and the single currency on the back of rumors that a report of this Wednesday will show a decline in orders of durable goods.

OECD countries expect to grow 0.7%

The 30 OECD countries are expected to grow by 0.7% in 2010, according to the OECD. The data for 2009 were negative, while investor confidence to acquire more profitable investments in currencies and stock markets increased today. Currencies linked with the rates of crude oil, such as the Aussie and the Norwegian Krone, showed the highest gains against the Japanese Yen, which faced a significant rally during the first days of this week. The US Dollar was one of the exceptions and dropped versus the Japanese Yen due to the expectations that a report will prove another decline in durable goods orders in the US.

In the hands of risk appetite levels

Currency strategists believe that the Japanese currency is left on the mercy of the risk appetite levels. Flows of risk appetite and aversion as well as confidence among investors weigh on the Yen despite the lack of Asian data pointing to any economic shifting. It will be difficult to forecast the course of the Japanese currency, in anticipation of the commodities and stock markets determining a pattern.

Second fall in three months

A durable goods orders report is expected to prove the second decline within three months today, which resulted in a considerable lost for the US Dollar versus most of the key currencies. The speculations on the durable goods orders report caused a decline in traders confidence to preserve their US Dollar positions. A possible decline in durable goods orders will be led by a lack of interest in investments in new devices currently, due to the unstable situation of the worldwide recession, which remains quite vital in several segments of the economy. Durable goods orders can be affected more negatively after the reorganizing plans for enterprises such as General Motors and Chrysler. The Fed could point to a weakening slump in North America, regardless of the pessimistic news, while the housing markets indicate that the situation is improving. Durable goods orders will only increase when there is strong evidence that consumer demand starts to rise, according to specialists. If not, these figures will probably continue to effect the US Dollar prospects for the followings months negatively.