Forex Market Update: U.S. dollar Strengthens against Yen
The U.S. dollar climbed sharply against the yen on Monday as global equity markets stabilized. However, the Japanese currency could rebound as market participants wait to get a clearer picture from the Federal Reserve over its stance on its bond purchase program.
The Federal Reserve is scheduled to start its two-day open market committee meeting on Tuesday and global investors will be eager to know when the bank would start tapering its multi-billion dollar asset purchases. The bank is scheduled to announce its policy rate statement on Wednesday.
Still, many economists are expecting that the Fed would keep continuing with its ultra-loose monetary policy for the time being. A Reuters’ survey showed that that the most economists are expecting the Fed to keep its bond purchase on until the year-end while some think that the deceleration of the bond purchases could start by this September.
In case, Bernanke keeps the monetary policy unchanged then it would put a lid on jump in bond yields which in turn reduce the volatility in the riskier assets class such as equities and currency markets while the yen would also slide.
In a note to clients, Tom Levinson currency strategist at ING said “It’s a bit difficult to call what Bernanke will say, but our best-case scenario is he will try to soothe bond market volatility, and that should help dollar/yen,” according to Reuters.
“If he is able to do that, dollar/yen should be able to find a base at 93.50 yen,” added Levinson.
At last check, the U.S. dollar gained 0.80% against the yen to trade at yen94.92, a slightly below its two month high of 93.75.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.
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