YEN DROPS ON INTERVENTION TALKS

The Japanese currency declined versus most of the 16 main traded currencies after speculations rose that Japanese officials are ready to intervene on the current yen’s level, as it would be an obstacle for the Japanese economic recovery, decreasing competitiveness for the nation’s exports.

After the Japanese newspaper Nikkei affirmed that Japan’s Prime Minister Yukio Hatoyama made statements against the yen’s current levels, the yen immediately dropped versus virtually all major currencies, since the current rally hasn’t been a point of concern among Japanese officials so far, creating an exodus of capital from the Asian nation as traders attempt to protect their portfolio from future losses if real measures to contain the yen’s appreciation will be taken. The yen has been subjected to extreme volatility as the nation’s central bank did not interfere on its fluctuations, caused mostly by shifts in risk levels among traders lately. The greenback gained versus the yen as stocks in the U.S. declined, forcing risk aversion up in North American financial markets.

Analysts agree that the yen is not likely only to fall if interventions follow, but its volatility rate is probably going to narrow its width, as risk levels have been playing a major role in the yen’s fluctuations. The next weeks will be decisive for the Japanese currency’s outlook, but the Bank of Japan is likely to hold itself for a while to analyze the impact of speculations.

CHF/JPY traded at 87.25 as of 21:42 GMT from a previous rate of 86.72 in the intraday. USD/JPY rose to 87.41 from 86.67.

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