Japanese Yen Declines as Investor’s Risk Aversion Eases

The Japanese Yen fell broadly today while higher-yielding currencies surged as investors’ extreme risk aversion receded following the coordinate efforts by global central banks to reduce interest rates yesterday. The situation remains tenuous as the market awaits additional steps by governments, especially the Group of Seven, who is meeting in Washington this Friday, to stabilize the global financial system and mitigate a prolonged global economic downturn. 

Because investors are moving out of low-yielding assets, the Japanese Yen dropped from a 3-year high versus the Euro and a 6-month high against the Unites States Dollar. 

According to Adarsh Sinha, a currency strategist at Barclays, while efforts are being made by the major central banks to recapitalise their financial institutions, there continues to be downside risks until other countries take similar steps. 

On October 8, 2008 at 11:39 GMT, the Euro rose by 2.15% against the Japanese Yen to 138.21 Yen; the U.S. Dollar gained 1.6% against the Japanese Yen. The Euro also recouped some ground versus the U.S. Dollar, increasing by 0.6% to $1.3702. 

The Australian Dollar is a high-yielding currency and was up 5.7% versus the U.S. Dollar to $0.7014. Yesterday, the Australian Dollar hit a 5-year low against the U.S. Dollar.