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EduPristine>Blog>Yen Weakens Against USD – Is the US on its Way to Recovery?

Yen Weakens Against USD – Is the US on its Way to Recovery?

December 27, 2013

The USD has shown some year-end promises here. It has surged up to a five year high against the Yen on Thursday.

USD went up to as high as 104.84 against Yen on Thursday and closed at 104.74 gaining 0.4 percent in the day. The reason that has been leading to this high ride is the expectation that US Federal Reserve will continue to withdraw its stimulus over the next year as well.

Another major factor leading to such movement is the continual stance of the Bank of Japan regarding monetary ease. Yen selling might even be the favorite trade option for the investors around the globe as there is no scope wherein Bank of Japan may tighten its knuckles regarding the monetary policy. On the contrary, it is expected that the policies might even be relieved further to tackle the never ending deflation. Bank of Japan is buying $66.8 billion of government bonds every month to somehow reach inflation target of 2%.

The forecast is that the USD versus Yen plot is expected to raise even further that is USD will keep gaining against the Yen in some time to come. According to the speculators, USD might even breach 110 against Yen in the year to follow. There would certainly be some restrictions due to the option related offers at 105 but this would also vanish in a month time when more participants call off their holiday seasons.

The news has been yet another add-in to US recovery bulletin. In the year where S&P 500 gained 21%, there have been other thriving factors which have been fundamental in surprising the world. The fact that people filing for unemployment benefits fell by 42000 to 338,000 in US has given a great push to the labor market.

Moreover, the yield on US 10 year bonds almost touched the peak of 3.007% which was reached in September. The US economy has grown at 4.6%, up from the earlier expected 3.6%.

US President Barack Obama has said that 2014 will be a breakthrough year for US economy. “We head into next year with an economy that’s stronger than it was when we started the year [and] more Americans are finding work and experiencing the pride of a paycheck,” he said.

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