There has been a lot of volatility lately when it has come to the Japanese yen. This is due to the diverse factors driving the currency. The bigger picture shows that the currency has slumped in the past 6 months. The greatest losses have been versus the dollar and the pound. This has come largely due to the policy of quantitative easing by the bank of Japan.Injecting more money into the Japanese economy seems to have negatively affected the Japanese economy. The reason why this policy was adopted in the first place was due to the nation’s exports being too expensive.
The yen did make some very important gains on Monday due to remarks made by government officials that there could be a scaling back of stimulus. Traders did not expect this, and that is why they bought into the Japanese currency. In addition, there was a feeling that the yen was somewhat undervalued. Therefore, investors were only too happy to go long on the Japanese currency.
The yen is trading very different this Tuesday, as there is a lot more confidence in the forex market. This has resulted in the JPY weakening. A factor to take into account for the JPY’s weakness is that a number of officials went back on yesterday’s statements, meaning that the Bank of Japan may extend its stimulus program after all this has resulted in the yen sliding on all fronts.
The above shows that you need to stay ahead of global economic events if you intend on trading the yen successfully.