The Japanese Yen has slid to
a record low against the Euro, with no obvious end in sight to the wounded
currency’s multi-year decline. The
basis for the continued yen weakness is the expectation that Japan will hold
interest rates at current levels until the end of the summer, a notion that was
reinforced by the Bank of Japan yesterday. As a result, carry traders, who categorically fear volatility, can feel
confident that a continued low interest rate environment will support the viability
of the Yen carry trade in the short-term. However, there are a few risks in the horizon, namely that Japan’s
economy and stock market are outperforming and could prompt a series of rate
hikes in the fall and lure Japanese capital back to Japan. DailyFX reports:
The rallies are
becoming overextended of course and the risk of some action by the Japanese
government is increasing, but until carry traders have a reason to bail, they
probably will not.
Read More: Japanese Yen Continues to Fall
Original post by Jimmy Atkinson and software by Elliott Back
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