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Categorized in | Featured Articles

Yen at Five Month High

Risk Aversion Benefits Yen

yen5The Japanese yen is at a five month high against the US dollar fueled by investor concern about US Q2 corporate earnings. Many investors believe that recovery this year will be minimal. The yen was also helped by an upgrade in Japan’s economic forecast. The dollar rose against commodity based currencies due to lower oil prices. Earlier in the year commodity based currencies such as the Aussie and New Zealand dollars had been big winners.

Geithner’s Remarks

The dollar was helped by remarks be Treasury Secretary Timothy Geithner who said that there was a good chance that the US and other major economies would see growth over the next two quarters. Trading has been thin due to summer holidays but some currency experts said that forex investors and traders are cautious despite expectations that some major firms will show signs of recovery. Lauren Rosborough of Westpac in London stated, “All the big banks, save Citi, are seen having positive earnings in the second quarter … but at the same time, the market wants to sell risk this week.”

Banks to Post Q 2 Earnings

Risk aversion has been dominant and has affected global currency exchange rates. The US dollar and the Japanese traditionally benefit from risk aversion and are seen as safe havens. Expectations of a change in the Japanese government have also contributed to risk aversion. This week several large banks will post second quarter earnings. Among these are Goldman Sachs Group, JPMorgan Chase & Co, and Citigroup Inc. James Hughes a market analyst at CMC in London stated, “This week there is heavy focus on the U.S. earnings season, and investors will want to see that any recovery for major companies is revenue-based and not cost-cutting based.”

Also due this week and sure to affect currency exchange rates are minutes of the last Federal Reserve policy meeting and a Bank of Japan meeting.

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