The US dollar (USD) Versus the Japanese yen (JPY) – May 31, 2010

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Here’s a different look on the gopher (USDJPY). Check out my previous post on the same currency pair here. Anyway, notice that the pair has just broken above its short term uptrend line. Now the pair could continue moving higher, though, it could hit some resistance at the 92.00 level. If it’s able to move past 92.00, it could once more aim for its 2010 high which is just below 95.00. On the other hand, if selling resumes and the pair falls below 91.00, sliding towards the 90.00 would be very likely.

The Japanese yen (JPY) woke up on the wrong side of the bed today as it weakened against most of the other currency majors to start the week. A herd of traders sold off the yen when a survey in Japan showed that majority of its citizens want their present Prime Minister, Yukio Hayotama, to step down from office. The Prime Minister had earlier fired Mizuho Fukushima, leader of the Social democratic Party, when she refused to sign the Prime Minister’s agreement to move the US base to a different location. This prompted the party to sever its ties with the incumbent government. These recent events in the Land of the Rising Sun sparked some speculations that the yen could lose its ‘safe-haven’ nature due to the political turmoil in the country. Of course, no one would want to buy the yen if Japan’s government is unstable.

In my opinion, the present government should at least try to reconcile with Social Democratic Party to prevent the political turmoil from getting worse. This, of course, is easier said than done especially regarding politics. The worse that could happen is that the Prime Minister gets forced to resign. If this happens, the yen would almost certainly get a hit. Though, in my view, the chances of this occurring are minimal. Still, Japan has a lot of things on its hands given its present battle with deflation and now politics.

Comments

  1. Web Design Lahore says

    yah , Sure , Japanese government has to do this to solve out their political issues . this will relay help out to solve the currency stability.

  2. Ron Acoba says

    The yen has been gaining a lot of ground because of risk aversion in the market due to the ongoing debt crisis in Europe. While some may think that a weak yen is favorable, for Japan, it is not necessarily true. Remember that Japan is an export-oriented country and with deflation just in their backyard, they need all the profit that they could get. A weak currency, in a way, helps as such makes their exports relatively cheaper and thus boosting the industry. Then again, it is always better to have a stable governance and economy in order to minimize the volatility in prices.

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