jpy fundamentals

Japanese Yen Pulls Back From Resistance as Dow Gains During Last Hour of Trading, Closes Up 6.55%

Friday, 21 November 2008 21:21:04 GMT  |  Terri Belkas, Currency Strategist

The Japanese yen tumbled on Friday as a last-minute surge in risk appetite lifted carry trades. Indeed, the Dow Jones Industrial Average ended the day up 6.55 percent at 8,046.66, but all of those gains were made during the final hour of trading.

With our latest forex correlations report showing a tight correlation between USD/JPY and the Dow, it’s easy to see why the Japanese yen ultimately ended the day down 2.34 percent against the US dollar, over 3 percent versus the British pound and euro, and more than 5 percent against the Australian dollar and New Zealand dollar. In economic news, the Bank of Japan left rates steady at 0.3 percent, as expected, but issued bearish commentary saying, “The outlook remains highly uncertain and given the slowdown in overseas economies and the turmoil in global financial markets, it will likely take some time for the necessary conditions for Japan’s economic recovery to be satisfied.” However, Bank of Japan Governor Masaaki Shirakawa also suggested that he wanted to avoid a return to Zero Interest Rate Policy (ZIRP), as additional rate cuts “would have many adverse effects on the functioning of the money market.” Regardless, we rarely see Japanese interest rate outlooks have a large impact in the forex markets, as risk trends dominate the direction of the Japanese yen.

Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.

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