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Japanese yen on the up |
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Japanese yen is snapping an eight-year slide against the euro and Australian dollar as the abrupt global economic slowdown forces investors to unwind long-entrenched positions, pushing these currencies into a downtrend.
The sudden shift in the outlook toward interest rate cuts in economies such as the euro zone took investors by surprise, spurring them to cut back on risky carry trades using the low-yielding yen to buy high-yielding currencies.
The move has also coincided with the dollar’s broad recovery, with the spreading weakness beyond the United States forcing some investors to abandon bets on a decoupled global economy.
Most major currencies, oil and commodities have tumbled. The Japanese currency rallied about 3 percent against the Australian and New Zealand dollars this week and 2 percent against the euro.
The sharp drop in higher-yielding currencies against the yen is likely to persist until investors fully factor in the global economy’s deterioration. Even Japan’s steady investment abroad that has kept the yen weak may not be enough to offset such selling pressure.
The abrupt shift in expectations sent the Aussie dollar sliding 9 percent against the yen in August, the biggest monthly drop in a decade.
The yen hit a two-year high against the New Zealand dollar and a five-month high against the Australian dollar on Wednesday, even as Australia and New Zealand still offer the highest interest rates among developed nations at 7 percent and 8 percent, respectively.
Australia’s rate cut was the first in seven years, while New Zealand trimmed rates in July for the first time in five years. Both countries’ central banks are expected to cut rates further.
Sterling and the euro touched five-month lows against the yen as more investors see the European Central Bank and the Bank of England lowering rates in coming months, with inflation concerns easing after oil’s 30 percent fall from its record peak in July.
Analysts say the euro, sterling, Aussie and kiwi all appear to have entered downward trends from long-term peaks and technical charts were also seen pointing to more weakness.
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All bullion contracts showed negative trend. Gold December 09 contract went down by 1.80% to Rs 14408 per 10 grams. Gold M July 09 contract shrank by 1.51% at Rs 14452 per 10 grams. Gold guinea July 09 contract went down by 0.71% to Rs 11467 per 8 gr |
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Hourly update on prices of key gold and silver futures on Multi Commodity Exchange of India. Change compared with previous end. |
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Gold priced remained firm in the Mid London trade thanks to the closure of US equity markets despite the strength in the dollar. However, the domestic counter was seen down. |
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