On Thursday, March 13 2008 at 00:52 (GMT) on the Tokyo Forex market, the Euro traded at 1.5527 dollars, an all time high against the dollar. Earlier that day the U.S. dollar traded at 101.36, the lowest against the Yen in 12 years.
Analysts believe that the fall of the U.S. dollar against major currencies is a result of investors’ concern about the effectiveness of the $200 billion liquidity injection by the four central banks, led by the US Federal Reserve. The liquidity injection will mitigate the immediate funding risk problems that the U.S. financial institutions are currently facing as they prepare for their quarterly book-closing.
Since the U.S. government is unlikely to use public funds to address their sub-prime mortgage difficulties, it is conceivable that the U.S. dollar will gradually reach the psychologically significant 100 yen level.
Now the real question, according to analysts is at what point will the Japanese authorities intervene in the foreign exchange market? And will it be a concerted effort to reverse the current trend? Jurgen Stark, a member of the European Central Bank council said they are concerned about inflation in the euro zone. This concern will undoubtedly put the euro in a buy-buy position.