JPY: Factors to watch 1) Global risk sentiment. Yen has been traditionally used as a safe haven and appreciates in times of risk aversion and uncertainty. 2) Interventions. The Bank of Japan often resorts to currency interventions in order to depreciate yen, improve export potential and fight deflation. Deflation has been a serious problem for Japan since 1990s, following the burst of the real estate bubble in 1980s. 3) Foreign assets of Japanese investors. Japanese companies have huge overseas assets. When they are repatriating profits, demand for JPY increases. In Japan fiscal year ends on March 31. 4) Oil prices. Japan heavily depends on oil imports. Rising oil price will increase the cost of production making Japanese exporters less competitive. This will have negative effect on Japanese economy and JPY. 5) CNY exchange rates. Japanese and Chinese exporters compete for US, Chinese and Japanese markets. So, if Yuan appreciates against the USD, Japanese exports will win, alongside with Japanese economy and JPY. 6) Carry trade. In times of risk appetite yen is used as a funding currency in carry trades. Low interest rates in Japan allow such traders to borrow money in yen and then invest it in countries with higher rates. This is a JPY-negative factor.
Posted on: Wed, 03 Sep 2014 10:07:05 +0000
Trending Topics
Recently Viewed Topics
© 2015