The Japanese yen rallied yesterday and kept its gains today as weakening of the yuan fueled concerns that Chinese economic growth is slowing. The political crisis in Ukraine added to risk aversion sentiment on the Forex market. The yen’s strength hurt carry traders, who hoped the currency to weaken.
Speculations are persisting that China’s incredible economic performance is not sustainable. Attempts of the People’s Bank of China to curb gains of the yuan did not alleviate such fears, and the drop of Chinese stocks just fueled concerns even more.
Meanwhile, Russia refused to provide another tranche of financial aid for Ukraine and said that the Eastern European country faces a risk of default. The current political turmoil in Ukraine does not help to get support from Russia or the European Union.
Many carry traders were hoping that the weakness that the yen has showed last year would persist in 2014. They were disappointed as the currency was rising for the whole December. The yen retreated in the first half of February, but the decline stalled and the currency was trading in a narrow range.
USD/JPY traded at 102.28 as of 7:24 GMT today after falling from 102.50 to 102.23 yesterday. EUR/JPY traded near 140.56 following the drop from 140.78 to 140.50. GBP/JPY declined from 170.71 to 170.52 before trading at about 170.57.
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