What is going on with the relationship between USD and Japanese Yen?
One of the dominating forex news stories centres around the relationship between the US dollar and the Japanese Yen. We have seen a rally, albeit perhaps briefly, against the dollar when online trading analysts learned that the Bank of Japan has not modified their domestic monetary policy as was moderately expected.
This decision was defended by the governor of the central bank when he stated that there is less volatility in the government bond markets than previously. This announcement led to the dollar declining 1.78 percent in comparison to the Yen during the American trading session on Tuesday. Some online traders and forex brokers believe that this leveraging of Japan’s currency and the resultant decline in equities may attract investment from abroad.
Another financial facet of the forex market that is being watched closely is the sudden plummeting of the Australian dollar to levels not seen since 2010. This bearish turn came amidst signals that the domestic economy may be showing signs of a protracted slowdown.
Underwhelming housing sales and a sluggish business sector underpin these sentiments and Goldman Sachs has warned of a potential economic downturn. Independent analysts still claim that Australia only faces a twenty percent chance of recession, however this is the highest probability of such an event since before World War II that did not result in an actual recession.
Should this outlook begin to gain solid ground, many online traders expect to see a further decline in the value of the Australian dollar. A subsequent investor exodus may occur concurrently as forex traders look to capitalise on markets with higher growth forecasts. Knee-jerk reactions aside, astute traders see a weakened Australian dollar coupled with extremely low interest rates a factor that may nonetheless continue to drive the economy. The weeks ahead will serve to illustrate whether this trend is indeed a possibility.
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