Yield Plays Undermine Yen

Daily Forex Fundamentals | Written by Investica | Jul 18 08 10:17 GMT |


Yen moves will continue to be influenced by global risk conditions with carry trades fuelling selling pressure on any significant advance.

The dollar strengthened sharply to highs around 107.10 in US trading on Thursday as Wall Street attempted to rally again on an improvement in risk appetite while the yen also depreciated sharply against the Euro. Weaker than expected US earnings data pushed the dollar weaker late in US trading and volatility is likely to be a key short-term feature.

Bank of Japan Governor Shirakawa stated on Friday that the central bank was treating the upside inflation risks and downside growth risks equally, but minutes from the latest policy meeting indicated that most members were more concerned over downside growth risks and this will reinforce market expectations that the bank will not increase interest rates.

The yen will remain vulnerable on yield grounds and, although Japan is a big net oil importer, the impact of lower oil prices is liable to be a slight negative factor the currency as risk appetite would improve with the dollar near 106.20 on Friday

Investica
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