By: Barbara Zigah
The Japanese Yen began the trading week at a fresh 4-year trough against the common currency Euro as well as a 4-month low against its U.S. rival, driven there as a result of the currency trade funding crowd. The most recent data indicates that net short positions in the Japanese Yen increased to the highest level in six years, an indication that most investors believe that the Japanese central bank will continue to push its very aggressive and ultra loose monetary policy for an extended period of time. News that the economic recovery of the third largest economy in the world is slowing is bolstering that broad consensus.
As reported at 11:13 a.m. (JST) in Tokyo, the EUR/JPY pair traded at a session high of 137.76 Yen, rising above last Friday’s high of 137.32 Yen. The USD/JPY pair retested last Friday’s peak at 101.36 Yen and currency analysts believe that it will soon break the July 8th high and that the pair’s rally, even in this short week for the U.S. markets, are likely to continue so long as the two central banks, i.e. the Federal Reserve and the Bank of Japan, continue to take divergent paths.
Euro Pressure Eases
Meanwhile, the Euro continues to ease away from pressure created by comments made last week which suggested that the European Central Bank might move to a negative deposit rate ultimately to encourage lending among peers. The ECB has tried now to play down those comments and the Euro is still working to recover from last week’s losses. The EUR/USD pair was trading at $1.3553, moving away from Wednesday’s trough of $1.3399.