The Japanese yen gained today as some Forex market participants doesn’t consider the current political events in the European Union (namely, the resignation of Greek Prime Minister and the future resignation of Italian Prime Minister) as positive for the European economy. Such traders prefer to buy the Japanese currency as a safe haven.
The change of leadership in Greece and Italy is considered to be good by many economists as previous leaders definitely weren’t able to deal with the problems of their nations. But change often brings uncertainty and this time it’s also true. New leaders may find new solutions to problems (the debt problems in particular), but they may also fail in battling the debt crisis or even make things worse. Those investors who have more pessimistic outlook prefer to stick to safer currencies, especially the yen.
There is a question: how about recent Japan’s intervention, shouldn’t it make the nation’s currency unattractive for investors? It seems the answer is: no, the yen remains in favor even after the intervention. It’s no surprise, considering that effect of interventions is usually limited in time. Unless the Bank of Japan would follow the Swiss National Bank in implementing unprecedented measures, like pegging the nation’s currency to the euro or some other currency, it’s unlikely that the yen will remain weak for long. Therefore, market participants will continue to flow to the Japanese currency in times of turbulence and uncertainty.
USD/JPY fell from 77.70 to 77.55 today as of 5:05 GMT. EUR/JPY was down from 107.50 to 107.20 and GBP/JPY declined from 125.00 to 124.72 today.
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