Title: Why is the Japanese Yen so Strong | Stock Trend Investing Guide
Headings: Why is the Japanese Yen so Strong
Why is the Japanese Yen so Strong
Click here for the USD/JPY 20-Year Exchange Rate Trend Chart.
Yen / Dollar Historic Trends
Expected the opposite
Currency Theory
1. The trade cash flow.
2. The investment cash flow.
Japan’s Trade and Investment Cash Flow
Trade Cash Flow
Investment Cash Flow
Demand for Japanese Assets
Summary
Just some crazy after thoughts
Recent developments that could have weakened the Yen
(but didn’t)
Read Also Our Other Popular Posts on the Economy
Click here for the USD/JPY 20-Year
Exchange Rate Trend Chart.
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Content: Chinese net purchases of Japanese debt have increased to 1.7 trillion Yen in the first six months of 2010, up from 255 billion Yen in the whole of 2005. Other investors are seeking a temporary parking place for their money when they sell their other assets. With the poor performance of stock markets around the world, the very low interest rate on U.S. treasury and the strengthening trend in Yen, Yen money market instruments could look very attractive. There could also be a perception among market players that the U.S. Federal Reserve may be more willing to conduct aggressive monetary easing than the Bank of Japan. The expectation that more new U.S. Dollars will be printed than that there will be new Yen printed, will strengthen the Yen. This perception was further strengthened last week when the U.S. Federal Reserve in a statement indicated that it might embark on more quantitative easing, increasing the amount of money in circulation in an attempt to help the economy pick up. The expectation for the differences in interest rate in Japan and the U.S. will also have its influence on the exchange rate. The Japanese interest rates have always been the lowest. But when the expectation is that this difference is will become less big (e.g. dropping U.S. treasury rates) or when the U.S. is not expected to increase interest rates for the foreseeable future, the carry trade will slow down or unwind, strengthening the Yen further. The same thing will happen when investments outside Japan are expected to become more risky or providing lower returns.