Yens gains massively and Euro rises on German confidence report

06-16-2009 14:12

The Japanese Yen posted impressive gains against the most important high-yielding currencies on the back of falling Asian equity markets due to speculations that a survey could show a delay in US industrial production, which resulted in risk aversion sentiment among traders today. The eurozone currency rose versus the US Dollar as the German economic sentiment climbed to a higher level than estimated, which resulted in speculations of a swift recovery in the eurozone, boosting demand for the Euro.

Yen rebounded after period of losses

Yesterday the Japanese currency traded rather disappointing in most of the worldwide stock markets, while today the Yen rose. During numerous weeks the Yen declined as a result of increased investor confidence, inviting them to invest in higher-yielding assets in the currency and equity markets. Concerns about the global economic prospect and Japanese Yen rose as a result of rumors that the US industrial production dropped for the seventh month. The Yen, considered as a safe-haven asset, showed the largest increase in more than a week, also boosted by a decline in risk appetite. Both commodity associated currencies and emerging market currencies showed the weakest performance versus the Yen.

German ZEW report

The economic sentiment report by the ZEW, Zentrum für Europäische Wirtschaftsforschung, is being considered by traders as a major indicator because it shows the largest financial scenario of the eurozone. Yesterday, this indicator climbed to the highest level in three days, mainly stimulated by the economic recovery in the eurozone in the last two months. Today the members of the BRIC (Brazil, Russia, India and China) could comment the situation of the US Dollar as the major global reserve currency, which resulted in pessimistic rumors about the Greenback’s prospect. In the meantime, the US Dollar fell on these negative speculations. The German report proved to be better than expected and increased the rumors around the Greenback, which stimulated a bullish pattern in the EUR/ USD pair, eliminating the bearish trend of last week.

Positive report received rather skeptical

Currency specialists received the optimistic German report quite cynical because many believe that, despite confidence improving considerably, Europe and also other parts of the world lack a stable support for a complete economic recovery, while economic conditions remain unstable. It is difficult to forecast the direction of the EUR/ USD pair due to the many factors which continue to weigh the pair.