World Currency Exchange Rates

Yen Heading to New High as No Intervention in Sight With Fed Rates on Hold

As the yen rallies to levels that prompted the Group of Seven to weaken the currency in March, traders are forecasting more gains, even as Japan falls into its third recession in a decade.

Three months ago, the yen soared as much as 8.5 percent in less than a week on speculation insurance companies would repatriate assets to pay for damages from the record earthquake and tsunami in northeastern Japan that triggered the worst nuclear disaster in 25 years. Now, politicians and central bankers are focused more on the slowdown in U.S. growth, Europe ’s sovereign-debt crisis and uprisings in the Middle East.

“The situation around the March intervention was very different,” said Paul Robinson, the global head of foreign- exchange research at Barclays Capital in London, the world’s second-largest currency trader according to Euromoney Institutional Investor Plc. “Uncertainty was just incredibly high and the speed of the yen’s move was the really worrying aspect from the authorities’ perspective.”

The yen strengthened 0.34 percent last week to 80.05 per dollar, and rose 0.62 percent to 114.52 per euro. The currency traded at 80.22 per dollar and 114.81 per euro as of 2:25 p.m. in New York today. Analysts have become less pessimistic on the currency, in part because the recent appreciation has been gradual. They predict it will end the year at 86 to the dollar, according to the median of 45 estimates in a Bloomberg survey. In May, they forecast 88.

In the aftermath of the record magnitude-9.0 earthquake and tsunami, the yen appreciated to 76.25 per dollar on March 17 from 82.98 on March 10 as damage estimates climbed to 25 trillion yen ($313 billion).

Europe’s central banks, the Federal Reserve and the Bank of Canada responded by joining with the Bank of Japan in selling yen on March 18 in the first coordinated intervention since they supported the euro in 2000. The yen fell the most against the dollar since September, ending at 80.58. By April 6, it had depreciated to 85.53, the weakest level in about seven months.

A weaker currency would help Prime Minister Naoto Kan lift the world’s third-largest economy out of recession after the Cabinet Office said June 9 in Tokyo that gross domestic product shrank 3.5 percent in the first quarter. Toyota Motor Corp. (7203) and Honda Motor Co. have said profits will fall because of the stronger domestic currency and disruptions caused by the quake. Both automakers said they may move production out of the country.

Anniversary of the reform freeze: Japan to expand the floating ...

6.4696, just skip a day, 620 days on the central parity of RMB against the U.S. dollar into a 6.46 era.

At a time when the reform to restart Week, this week is the increasing risk of default of Greece, the Fed will QE2 until the end of June, Citigroup said the dollar will reverse the trend of the past 10 bear delicate period. RMB has appreciated 5.5% in the final freeze-frame the reform week.

This seems to be a compromise of speed; by far this has been the appreciation of the range of 2.3%, it is learned, this expected appreciation of the whole decision-making about 5% of target; more than half the time now, appreciation is also close to half.

At the same time, volatility, he expects daily to expand the floating range from 0.5% to 1%.

“spiral” appreciation behind

However, the performance of the one of the RMB exchange rate has led to a little voice of doubt.

a rate experts say, a week after the reform there are two major problems: fluctuations of the RMB against the U.S. dollar is still extremely small, a rapid growth of reserves, prepare too much focus on the U.S. currency, non-US currency trading is not active , hedge foreign exchange market, “fat”, “education”, not opening up this question under the root; addition is the currency basket of currencies on the OTC transactions in U.S. dollars only, ringgit and the ruble, which the yuan against a basket of currencies change virtual home.

In fact, the data show that in the past 200 trading days, the central parity of RMB against the U.S. dollar appreciated a total of 147 days, 92 days devaluation; showing a “spiral style “rise; Although there is no lack two-way fluctuation, flexibility significantly enhanced, but still induced a unilateral appreciation of the expectations. So that some scholars believe that appreciation is not in place but “something counterproductive.”

world by the Chinese Academy of Social Sciences, Deputy Director of International Finance, said Zhang Bin, a one-time rise bit as good as a choice, because the appreciation of the current small step entry equal to distribute invitations to speculators.

According to BIS data show that from 5 to 11 since the end of the real effective exchange rate appreciation of 2.75%, and from 5 to 6 since the end of the end, the cumulative real effective exchange rate depreciated slightly 0.65 percent. But half of 2010, the renminbi’s nominal and real effective exchange rate appreciated by 5.1%, respectively, and the cumulative 3.4%.

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