Forex Blog: Currency Trading News & Analysis.

February 2nd 2006

Yen falls on interest rate expectations

For several years, real interest rates in Japan have remained effectively negative, allowing those who were creditworthy to borrow enormous sums of money at improbably low rates. It was hoped that the extremely loose monetary policy would stimulate the Japanese economy, by encouraging consumers and businesses to borrow money towards consumption and investment, respectively. While the Japanese economy is finally beginning to show signs of life, and the risk of deflation is waning, Japan’s Central Bank still appears unwilling to lift interest rates. In a recent press conference, representatives from the bank indicated that it would first need to see strong evidence of economic growth and inflation before it would even consider raising interest rates. The news sent a shiver through currency markets, as traders priced in the possibility that interest rates would remain low for a while longer. The Financial Times reports:

Steven Pearson, chief currency strategist at HBOS, saw signs of rising inflation expectations, with the BoJ likely to fall behind the curve. In this environment he saw Japanese retail investors continuing to buy gold, selling yen in the process.

Read More: Yen slides on monetary policy fears

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© 2004 - 2018 Forex Blog.org. Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.