Implications Of Strong Yen On World Wide Foreign Exchange Market

Share Article

A strong yen opens the door for new strategies in currency trading. InvesttechFX reviews the performance of the Yen through October 2011 and analyzes potential effects related to the Forex Market.

online Forex Trading


Forex ECN - The Wave Of The Future "

InvesTechFX, a leading online Forex platform, has been taking a close look at the yen and its broader effects on the Forex trading markets. The strength of the yen has been a concern in the world's foreign currency exchanges for most of the year. Analysts and Forex trading experts are contemplating different yen scenarios and how they could affect the world's Forex currency exchanges.

The Bank of Japan has considered intervention against a steep rise of its currency, but thus far Japanese commercial and investment banks have done a good job of purchasing U.S. dollars. Japanese investors aren't alone in these massive purchases, American and British investors involved in Fx trading have also been stocking up on the greenback, thereby keeping the yen from becoming even stronger.

The strong yen is not having a very positive effect in Japan. Industrial production is shifting overseas to take advantage of inexpensive labor costs and lower taxes. The Bank of Japan has expressed deep concerns over the possible effects of a prolonged period of yen strength in the Japanese economy, and it stands ready to enact monetary policy in order to keep it from rising. But the possibility of intervention is currently unlikely, leaving Japanese exporters wondering if they'll ever get any relief.

There seems to be a sense of duty among Japanese politicians to not worry too much about the yen. More important issues are at hand, such as the approval of the ¥12 trillion budget aimed at post-earthquake and tsunami reconstruction efforts. The Bank of Japan also recognizes that intervention may not be as swift as desired, since the yen has become a safe-haven currency in the Forex currency exchanges.

InvesTechFX experts are looking at the yen in a similar fashion as they looked at the Swiss Franc until not long ago. The Swiss National Bank intervened to lower its own currency once it noticed that it had become a safe-haven for institutional investors. Online Forex traders were also looking at the Swiss Franc as a flight-to-safety strategy until the Swiss National Bank made its decision. It is now the yen's turn to be the major currency of choice for traders who aren't fond of the volatile greenback or the euro.

Any intervention by the Bank of Japan to devalue the yen would probably be short-lived. Should the yen take a sudden dive, it would definitely shake the online Forex trading world, but probably not for long. The concerted efforts of the U.S. Federal Reserve have been successful in keeping the greenback from weakening, thereby keeping the yen from suddenly skyrocketing. If the yen tumbles, the foreign currency exchanges would probably help it along, leaving other traders to capitalize in the short-term.

Not all Japanese are terribly concerned about living with a strong currency. The current state of deflation in Japan has increased consumers' purchasing power. After the devastating earthquake and risk of nuclear meltdown, Japan is more interested in importing natural gas, something they can better accomplish with a strong currency.

InvesTechFX sees the strong yen as a new chapter in the Japanese economy and a forerunner of new trading strategies. Traders who are partial to stable currency pairs will probably gravitate towards the USD/JPY, while those who love volatility will probably enjoy EUR/JPY. A tumbling yen will not rewrite history, but will open the door for some very interesting trades.


Share article on social media or email:

View article via:

Pdf Print

Contact Author

+1 800 569 5861
Email >
Visit website