The slide created by the Bank of Japan’s radical monetary easing measures has caused the Yen to fall beyond a three-year low against the Euro and has come closer to 100 to the Dollar.
The gains against the Japanese currency helped push the Euro upwards to a one-month high against the US Dollar. The single currency is set to make further gains as market speculation increases that Japanese investors looking for higher returns could be about to pile into Eurozone assets.
“There is a lot of talk about Japanese investors moving abroad, but it’s hard to see them heading for bonds from the likes of Spain or Portugal. They’re unlikely to buy (German) bonds either as they don’t offer any yield,” said Kyosuke Suzuki, director of foreign exchange at Societe Generale.
Rumours are circulating that Japanese investors have already turned their attention overseas as they search for higher returns. Many market participants were sceptical however, as Japanese institutional investors are notoriously cautious, and said the flows were more likely driven by speculators buying in anticipation of their arrival.
In the space of a week the Dollar has leapt by around 7% against the Yen after the BOJ announced that it would pump $1.4 trillion into the economy in its battle to defeat deflation. The Japanese moves took most economists by surprise as they had not expected it announce plans on such a huge scale.
The Yen could weaken further against the US Dollar, perhaps finally breaching the 100 to the Dollar mark as attention turns to the release of Federal Reserve’s latest policy meeting minutes, due at 19:00GMT.
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