By: Barbara Zigah
The Japanese Yen traded close to a 5-week peak versus the U.S. Dollar on speculation that there is growing pressure on Japan’s banks to raise capital. As reported at 6:51 a.m. (GMT) in London, the Yen was trading at 89.15 Yen against the U.S. currency, off of yesterday’s peak of 88.74 Yen in New York. According to a major Japanese currency broker, the severity of the business environment on the largest Japanese banks is so severe that they’re being forced to acquire additional capital, and with the risk aversion factor spurring demand, the Yen, as a safe haven currency, is under heavy consideration. Contributing to the Yen’s gain was a decline in Asian stock prices, with the Nikkei losing .6%.
In terms of capital strength, several of Japan’s largest banks, including Sumitomo Mitsui Financial and Mizuho Financial Group, trail other global financial institutions. It was agreed by leaders at the recently held G20 meeting in Pennsylvania that new rules would be drafted that would compel banks to increase their capital requirements and to hold better quality capital, as well. These new global banking requirements are expected to be put in place by the end of next year.
Japanese Yen Nears 5-week Peak on Potential Changes to Capital Requirements
Barbara Zigah