Chinese lending limits favor Yen – Interest rates expectations fuel Aussie rally

01-17-2010 10:48

Risk aversion increased this Friday as a result of investors’ concerns about the lending restrictions in China, which were proclaimed this week by the Chinese government, and may affect the worldwide economic development, providing the Japanese Yen support to rise against all key currencies in the Forex market today.

Japanese Yen

The Japanese Yen rose this Friday against the US Dollar after Japanese figures slightly disappointed expectations, and also demonstrated a decline in inflation. The Common European Currency dropped considerably against the Japanese Yen due to concerns about the Greece budget deficit still impacting the prospects for the Euro negatively, increasing the demand for the safe haven Yen. The Chinese lending limits will not only impact the Asian economic area, but also the worldwide economy as a whole, given the fact that Chinese trading is well spread over the globe, and these measures can hamper the economic recovery forecasted for this year.

Lending restrictions China

Demand for safety increased as a result of the new Chinese banking policy, fact that boosts the Japanese Yen, according to currency specialists. The Japanese Yen had posted record low rates against commodity linked currencies such as the Loonie, while the side effects of the Chinese announcements boosted the Japanese Yen.

Australian Dollar

Interest rates are driving the Australian Dollar’s rally, which was also the case in the last two quarters of 2009 when the Aussie posted one of the best results in the Forex market.
Optimistic employment figures that were released in the South Pacific country last Wednesday are stimulating the Australian Dollar to reach strong levels against the majority of the key currencies. A decreasing joblessness rate, presently at 5.5%, outshines other important economic areas in the world and is prompting expectations that interest rates will be raised again in Australia next month.