Japanese yen in forex tradingRight now, the only major currency doing well against the U.S. dollar is the Japanese yen. This is not much of a surprise, since both are [B]safe haven currencies[/B] and these are in demand today as risk aversion rises.
While risk aversion does play its part in the gains posted by the Japanese yen in [B]forex trading[/B] on the currency market. It doesn’t tell the whole story. Nor does it tell the story of what could happen to the [B]Japanese economy[/B] of the yen continues to gain strength in currency trading.
GFT’s [B]Boris Schlossberg[/B] comments on the challenges faced due to a rising yen in FX360:
However, the biggest reason for yen’s strength tonight may have to do with an announcement by Japanese authorities that they will [B]waive taxes on repatriated profits from April 1 to help support the economy[/B]. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings.
Although the impulse behind this gesture by the Japanese government was to stimulate domestic demand by bringing capital back home, [B]the unintended consequences of this policy could result in further contraction of the Japanese economy[/B] in the second half of this year. A massive influx of capital back to Japan in September could drive the yen higher perhaps even targeting the 9000 level. This will occur just as China - Japan’s most important trading partner - is looking to limit its massive capital spending. [B]A rising yen at a time when the country’s biggest customer is looking to curb demand could spell disaster[/B] for export oriented Japanese companies as their profit margins become squeezed once again as they did in Q1 of 2009.
[B]See Also[/B]
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[li]Japanese Yen in Currency Trading[/li]Forex trading on the currency market
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