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Yen Continues Rally on Speculation That Drop Was Overdone

January 9, 2013 at 0:37 by Vladimir Vyun

1,000-yen banknotesThe Japanese yen continued its rally as risk aversion returned to the Forex market and on speculations that the huge decline, which the currency has experienced by the end of the last year, was overdone.

The yen has started its drop against most currencies in the middle of November and moved down almost without pause till the beginning of this year. The currency has lost about 5 to 7 percent of its value just in the last few weeks. Market participants started to speculate that the decline was excessive and all the bad news was already priced in. If such view holds, the yen may continue to rise over the next several days regardless of news.

Additionally, the Japanese currency got support from its role as a safe haven. Traders were somewhat fearful recently and feel uncertain ahead of policy meetings that several central banks (including the European Central Bank) will hold this week.

USD/JPY traded at about 87.05 as of 00:37 GMT today following the drop from 87.77 to 87.03 yesterday. EUR/JPY was near the yesterday’s close of 113.83 after tumbling from 115.12. GBP/JPY slid from 141.44 to 139.73 and remained near that level today.

If you have any questions, comments or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

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