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Japanese Yen Interest Rate Forecast
Friday, 12 September 2008 16:40:18 GMT  |  David Rodriguez, Quantitative Analyst
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Japanese Yen Interest Rate Bias: Neutral

Japanese Yen interest rate forecasts have arguably played little role in the valuation of the US Dollar/Japanese Yen forex pair, and instead we see that global risk appetite and the US dollar dominate price movements in the low-yielding Yen. Given the lowest short-term interest rate among industrialized nations of 0.50 percent, traders will often sell the JPY against higher-yielding counterparts to collect the difference in rates. That said, it would likely take a truly material shift in Japanese rate forecasts to have a noteworthy impact on large interest rate spreads against currencies like the Australian and New Zealand dollars.

Markets currently predict that Japanese interest rates will remain relatively unchanged in the coming two years of trading, and as such, there is little interest rate bias for the Japanese Yen itself.  

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