Forex Reader

– Pushpa Sathish, Staff Writer

The yen continues to fall against the dollar and the euro, fueled by a low interest rate and the Bank of Japan’s (BOJ) Governor’s statement that he did not have a planned schedule to hike interest rates. The drop has driven hedge fund managers and other currency speculators to place a large number of bets that the yen will decline to a record low against the dollar, says a report from the U.S. Commodity Futures Trading Commission. Predictions from Credit Suisse, Barclays Capital Inc. and Bank of Tokyo-Mitsubishi UFJ Ltd. see the yen falling to 125 per dollar over the next few months, the lowest exchange rate since 2002. Bloomberg reports:

The BOJ benchmark is the lowest among industrialized nations, encouraging investors to borrow yen and buy higher- yielding assets elsewhere, in a practice known as the carry trade.

– By Pushpa Sathish, Staff Writer

China’s large foreign exchange reserves has been the subject of numerous discussions, debates, and theories. Of late, economists and analysts have been urging the country’s central bank to diversify its forex holdings and minimize the risk of a significant drop in the US dollar. We’ll never know if the People’s Bank of China succumbed to such pressure or if it acted on its own strength, but the bank confirmed recently that it had purchased a large amount of Japanese yen.

With intense international speculation that increasing interest rates and a continuous period of economic expansion (the longest since the Second World War) will push the yen upwards, the island nation’s currency is a hot favorite and is being snapped up by Russia, Switzerland and New Zealand.

As a direct result of all this frenetic buying of the yen, the Japanese currency has risen further. The world’s second-largest economy is growing twice as fast as expected, leaving the yen with its highest gain in a week on November 14. A survey of 16 economists revealed that 10 of them are of the opinion that the Bank of Japan will raise interest rates again before the first quarter of 2007, with 4 of them saying that the hike could come as early as December this year.

– By Pushpa Sathish, Staff Writer

Since foreign exchange levels are decided according to the strength of a nation’s economy, Japan has no need to fear a weakening of the yen, said Japan’s vice finance minister and leading currency bureaucrat, Hiroshi Watanabe. Japan, which is the second largest economy in the world, will grow at the rate of 2 percent later this or early next year, with its economy on a convergence path with that of the United States and Europe. The minister pooh-poohed former finance minister Sadakazu Tanigaki’s statement that the euro-yen exchange level was volatile as being outdated.

– By Pushpa Sathish, Staff Writer

Foreign inflows into a country have the effect of raising the local currency, (the exception is China which has been accused of artificially devaluing the yuan), so the takeover of Malaysia’s air-conditioner maker by a Japanese firm is seeing the ringgit strengthen. Daikin Industries is buying out OYL Industries Bhd. for the sum of $1.95 billion.

Also contributing to the inflow is the intent of Japan’s Marubeni Corporation to buy 10 percent of Malaysian software vendor Rexit Bhd. The two companies are also planning to create a joint venture to increase sales outside the country. Bloomberg reports:

“These cross-border flows are probably lending a bit of support to the ringgit,”‘ said Ben Simpfendorfer, a currency strategist at Royal Bank of Scotland in Hong Kong. “Talk of mergers with the background of a slightly weaker dollar is helpful, though it’s likely to stall at these levels.”

–By Priya Venkatesh, Staff Writer

Do you know what happened to the value of Japanese Yen in today’s Forex market? Read on to know the details!

The values of yen this evening rose slightly and one US Dollar was sold at 119.58 yen compared to a figure of 119.75 yen the day before.

The expansion in money supply rate, the increase in bank loan rates, and the growth pictured by the electrical machinery and industrial sector are the factors, which attributed to this rally of yen in the market today. Consumer finance companies have shown a slight increase amidst the drastic fall of it during the start of this week.

Government Bonds showed a steady increase in value and this was also one of the factors that contributed to this rally of yen in the forex market today.

Click here to know more details of the yen in the forex market.

The yen surged significantly, after Germany’s deputy minister confirmed that the G7 group of leading industrialized nations would discuss the recent weakness of the Japanese currency at its upcoming meeting in Singapore. It is well known that the euro continued to hit record highs against the yen almost on a daily basis. However, the news of G7 meeting has made yen a focal point for policy makers.

The G7 is no longer willing to allow the yen weakness to continue, as Japan doe not require a weak currency for its rising economy. The yen has slid against both the dollar and the euro, as investors exercised restraint against their expectations of aggressive monetary policy.

Read my previous post titled “Japan’s Forex Reserves Hit a Record High” for more information on Japan’s forex reserves.

The threat of a nuclear war has pushed the yen to a record low against the euro. Rumors are rife that the North Koreans are getting set to conduct an underground nuclear test following a report in ABC News that there was suspicious movement at a suspected North Korean test site. The news item, which quoted an anonymous senior military official, was based on the surveillance results of a U.S. intelligence agency. The fact that North Korea fired seven missiles over the Sea of Japan on July 5 has not helped matters. Bloomberg reports:

“Mounting regional tension raises investment risk and prompts investors to shift funds out of Japan,”‘ said Mamoru Arai, a senior foreign exchange sales manager at Mizuho Corporate Bank in Tokyo, a unit of Japan’s second-largest lender by assets. “Japan is geographically close to North Korea.”

Japan’s foreign exchange reserves rose to a record high for the fifth straight month. It reached $871.94 billion at the end of July 2006. It is important to note that in June, it was $864.88 billion. The gain is definitely significant. Japan’s forex reserves are the second largest in the world, just behind China.

The foreign exchange reserves consist of securities and deposits denominated in foreign currencies besides the IMF reserves. The changes in Japan’s forex reserves usually occur when the concerned authorities intervene in the currency market to prevent the yen from degradation.

The yen managed to remain static after slipping from a one-month high against the US dollar. Market players have not turned cautious about the consistency of the Japanese currency. They are doubtful whether yen would benefit from a Bank of Japan interest rate hike this week. The Bank of Japan raised rates for the first time in six years to 0.25 percent. The bank sources made it clear that the Central Bank would lift rates slowly as the economy is on the way to recover from a decade of deflation. Investors see a 50 percent chance of the Federal Reserve raising rates to 5.5 percent. The European Central Bank is also expected to raise rates to 3 percent.

According to Reuters -

The yen has struggled for much of the past 18 months against major currencies due to the very low interest rates in Japan and the desire for higher-yielding foreign assets by Japanese investors. In early Tokyo trade, the dollar was little changed at 114.30 yen after rebounding from a one-month low of 113.45 yen struck on electronic trading platform EBS the previous session.

After North Korea test-fired seven missiles on Tuesday, the Asian Stock market went into a tizzy. The worst hit was Japanese Yen. It slipped to a record low against the Euro. It is well known that Japan vociferously protested against the North Korean missile test and warned the country not to carry out such tests. There is a fear in the market that the North Korean move may force Japan to take some drastic steps that might bring significant changes to Japanese economy. The Korean issue has dominated the market and its first reaction was to sell yen. The market preferred to buy safe currencies like dollar and euro.

According to Reuters -

The yen has been under pressure this week as investors expect the Bank of Japan to take its time raising interest rates, currently at zero. Japan is expected to increase rates next week — its first tightening in six years — but that will still leave it far behind the ECB, which looks set to tighten further from the current 2.75 percent.