Wednesday January 18, 2006 - 10:48:35 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Rising risk aversion
The dollar pushed higher in Asia on Wednesday to 115.80 as the Japanese markets weakened, but the dollar fell back to 115.0 in early Europe.
The Japanese currency was unsettled by another sharp drop in the Nikkei index following the investigation of internet company Livedoor and the market was closed early due to the imbalance of orders in the market. The drop in equity prices will raise concerns over the Japanese economy which will tend to weaken the Japanese currency, especially if there is a withdrawal of overseas funds. Any sustained drop in equity prices would also make it much more difficult for the Bank of Japan to tighten monetary policy. The previous inflows to Japan had been hedged against a falling yen, however, and paradoxically a drop in prices could offer near-term yen support as hedging levels would be lowered which would involve yen buying.
A general rise in risk aversion will also tend to support the Japanese currency as there would be a drop in capital outflows from Japan and there would be an increased risk of capital repatriation back to Japan.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."