By: DailyForex.com
The U.S. Dollar took a beating last week, against the safe haven Japanese Yen the greenback recorded its worst single week in more than a year. On Friday, after extreme volatility and a rout from a 5½ year peak on the Japanese Nikkei, the USD/JPY pair had traded at a low of 100.68 Yen, and had fallen nearly 2% for the week. Unexpectedly dismal trade data from China had sent forex investors seeking out the safe haven Yen and pushed the yield on 10-year JPGs to 1%, the highest price in more than 12 months; in the aftermath, the governor of the Bank of Japan said that most of Japan’s banks had sufficient buffers in place to protect them from losses as a result of rising bond yields.
Investors continue to be wary of any potential movements by the Bank of Japan which is adamantly targeting a 2% inflation rate; however some members of the BOJ have cautioned that that target could be unreachable within the next two years. Coupled with recent comments made by the Japanese government who expressed concern over the Yen’s newfound weakness there is a great deal of uncertainty growing as to the long term Yen’s direction. Analysts believe that the USD/JPY pair might see some strengthening if the Fed intends to ease back on the stimulus throttle, but a continued prolonged drop in Japan’s equity markets could send investors to seek out the Yen instead. As at 12:50 p.m. (JST) in Tokyo, the USD/JPY pair was trading at 100.9751, a loss of 0.27%.