As reported at 2:43 p.m. in Tokyo today, the Japanese Yen showed broad gains in trading, as the hope of a rebound from the Euro and other commodity currencies slimmed. The Japanese Yen had become a favorite sell versus commodity currencies in the equity markets, on the hope that the global economy was taking a turn for the better. However, recent uncertainties have resulted in a reduction in short Yen positions. Markets are still trying to determine the direction of interest rates in the long term and it appears that the health of the American banking sector will provide the biggest clue to that direction. To that end, markets are awaiting the result of government instituted “stress tests” to determine the health of U.S. banks.
The normally busy currency markets have been extremely volatile in recent days, erasing gains and reversing losses in a single day. The Euro, for example, showed gains yesterday from improved sentiment in the German economy, but the forward momentum has ceased, and the Euro is now struggling versus the Japanese Yen.
The Euro lost 0.1%, trading at $1.2940 just slightly higher than the recently posted 1-month low of $1.2888. The Euro also lost .5% versus the Yen, trading at 127.23 Yen, after a near 1% gain yesterday. The U.S. Dollar lost .4% against the Yen, trading at 98.32 Yen following a gain of .8% yesterday.