The Japanese yen rose up to the 13-year high versus the U.S. dollar and the new long-term maximums against the other major Forex currencies today as the high risk carry trades were shunned by the traders.
The yen also climbed to the highest level against the euro in last 6 years as the probability of the recession in the Eurozone countries rose significantly. The spread of the credit crisis in the European countries signals that more liquidity may be required to keep the financial system form crash soon.
Another yearly record was shown against the Great Britain pound. The yen reached the 8-year maximum versus the British currency today after the commentaries by the countrys monetary authorities that indicated that the U.K. is heading into recession this year.
Analysts believe that the current extremely fast growing of the yen is dictated by the unwinding of the carry trade. Yen-based carry trade involve selling low-yielding and low-risk yen for the high-yielding risky assets, including other major currencies. As many investors favored the carry trade in the past 7 years, pushing the Japanese yen down below the just price, what we see now is the massive sale of those positions.
USD/JPY fell from 97.99 to 94.98 as of 8:09 GMT today, losing more than 3 percent in a single Asian trading session. EUR/JPY declined from 127.07 to 120.23 — almost 5.4 percent daily decline. GBP/JPY dropped from 159.80 to 150.43, posting the highest relative loss today — 5.8 percent.
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