Yen up on funds repatriation expectations – Real rises sharply

Yen up on funds repatriation expectations – Real rises sharply

10-31-2009 10:13

The Japanese Yen climbed versus the Greenback this Friday, while the USD/ JPY pair was corrected yesterday, as currency traders expect Japanese exporting firms to perform a possible funds repatriation. The Brazilian Real posted one of the biggest gains against the Greenback this Friday due to domestic and international economic conditions.

Unchanged rate

Japan’s central bank did not change the reference interest rate of 0.1%. The bank stated that it could end the acquisition of corporate debt by the end of 2009, demonstrating confidence in a more stable Japanese economy. The Japanese Yen climbed versus all main currencies this Friday as the Yen is affected by the policy of buying out the corporate debt.

Conversion

Japanese exporters sell their services and products abroad for the overseas currency, with the US Dollar as the most used currency. The exporters need to convert the overseas earnings to Japanese Yen. Most exporting firms were less interested in the conversion process when the USD/ JPY pair valued below 90. In the last two weeks the rate climbed to approximately 92, on which exporters became more eager to convert.

Repatriation expectations

The current rising trend of the Japanese Yen is not expected to last for a long time, given the fact that the repatriation could end when the level of 90 Dollar per Japanese Yen is reached again. These levels could also lead to a currency intervention by the Japanese central bank. Another extensive Yen-based carry trade could be boosted by the international economic recovery in combination with a currency intervention.

Real rises sharply

The Brazilian Real posted one of the biggest gains against the Greenback this Friday due to domestic and global economic conditions creating risk-seeking, improving the attractiveness of emerging currencies, and devaluating the US Dollar against the majority of the 16 most popular currencies.

Risk-seeking

Brazil’s Real was driven by risk seeking in foreign exchange markets as a result of a report demonstrating third-quarter economic growth in the North American country. The Real also benefited from domestic expectations that the Brazilian Central Bank will not utilize a currency intervention to end the Real’s appreciation.