USD with Five Year High against Japanese Yen

USD with Five Year High against Japanese Yen

In attendance the U.S. Federal Reserve will be tampering its bond buying programme, the USD hit its highest level against the JPY Japanese Yen

The dollar rose to JPY 103.85 last Friday in Asia, this is the highest level since October 2008. The JPY has lost 16 % against the USD in 2013, making it its weakest performing major currency against the USD.

The outside value of the USD got impulses from U.S. retail sales data for November reporting the sharpest increase since June at 0.7 %, experts were expecting 0.6 % increase.

The strong economic US indicators will allow the central bank to start the tapering of its USD 85 billion per month bond buying programme during December, instead of the markets previous estimates of between January and March.

In turn, the JPY’s slide is based upon Japanese Prime Minister Shinzo Abre’s pledge to thwart Japan’s decades’ long economic stagnation. This is now better known as “Abenomics”, and has the backing of the Bank of Japan. In past April, the central bank announced a USD 1.4 trillion of economic stimulus over the next two years, this caused the decline of the JPY and bond yields to fall to record lows.

Japanese officials have recently hinted that this enormous some would not be sufficient. The government thus has approved a JPY 5.5 trillion (USD53 billion) spending package to offset an increase to the consumption tax in April.  The central bank stated that it would not rule out increasing the size of its assets purchase programme if growth were not to pick up. The Bank of Japan insisted that it isn’t deliberately trying to weaken the Yen, helping the economy by increasing exporters’ profits. It called it a natural by product of monetary easing measures.

The reverse side of the medal is that investors are eager to bet against the Yen and at their highest level since June 2007, as data from the Commodity Futures Trading Commission reported a week ago. Observers note that the Yen will not fall as quickly against the USD as it did during the first wave of selling. At that time the dollar rose 30 % against the Yen between November 2012 and May 2013. These experts don’t expect that the USD will increase to JPY 120 within the next few years.

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