Currency news - Fear drives yen stronger

Fear drives yen stronger - 16-01-08

Risk aversion will continue to support the yen, although at least a limited correction is realistic after rapid gains.

The yen pushed to a high of 106.65 against the dollar after the US data on Tuesday as Wall Street dipped sharply before settling close to 107.0. There was buying support on any retreats and the yen strengthened to a 30-month high near 106.0 in Asia on Wednesday.

Risk aversion remained at elevated levels with the Nikkei index continuing the trend of falling stock markets. With volatility levels also higher, there will be greater caution over carry trades which will help underpin the yen.

The Japanese machinery orders was slightly stronger than expected with the decline held to 2.8% for the month while wholesale prices were higher. Japan will not be immune to fears of weaker growth at the same time as higher inflationary pressure with consumer confidence at a 5-year low.

Markets will be on high alert over protests against yen strength from Japanese officials. A lack of comment would increase speculation that further yen gains will be tolerated by Japan and volatility levels will remain higher in the short term.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

Full list of daily currency analysis

This analysis report is intended for distribution to ACM Advanced Currency Markets SA private, corporate customers and members. Information contained in this report is based on data obtained from sources considered to be reliable, however, no guarantees be made by ACM Advanced Currency Markets SA as to the accuracy, timeliness and completeness of the data. The opinions and forecasts contained herein are subject to change without notice and ACM Advanced Currency Markets SA accepts no liability for any losses, damages and/or expenses incurred arising from or in any way connected with the utilisation of all or part of this report. This report is meant for information purposes and is not intended to be and should not be construed as an offer or solicitation to buy, sell foreign exchange or indeed any other financial instruments. This report, or any part of it may not be reproduced or distributed without the prior consent of ACM Advanced Currency Markets SA.