Following news that the Japanese Prime Minister will stay in power after an inter-party vote, the yen hit a fresh 15 year high against the US dollar. The news reinforced suspicions among investors that the Bank of Japan would not attempt to intervene and devalue the yen. USD/JPY dropped as low as 83.07 before staging a moderate correction. Currently the pair is trading around the 83.30 level. Analysts are warning that if the yen is not devalued, the USD/JPY pair could drop well below the 83.00 level.
In other news, the euro dropped some of the gains made over the last few days following a significantly worse than expected German ZEW Economic Sentiment figure. The figure is a prediction of economic health according to a number of experts. At -4.3, this month's result was the lowest since January 2009. Investor confidence in the euro-zone economic recovery was shaken as a result, causing the EUR/USD pair to drop almost 70 pips.
As for the rest of the day, a better than expected US Core Retail Sales report is currently causing riskier currencies to make gains against their safe-haven counterparts. It appears that the risk taking occurring in the marketplace at the moment may be the start of a prolonged trend, in which case the greenback is likely to continue to reach new lows.
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