The latest announcement made by Japanese Prime Minister Yoshihiko Noda has impacted the major currency of the country, Yen in a bad way. Yen has fell against USD marking the biggest drop in last 8 months (This is the biggest fall since 9th March, 2012). Incidentally, Noda has decided to dissolve the current parliament, therefore, paving the way for elections. According to pre-poll surveys, Noda’s Democratic Party of Japan is going to lose in the elections.
It is presumed that the new Japanese Government is going to pressurize the Central Bank for a rather aggressive easing policy and this assumption has resulted into Yen losing ground against not only USD, but most of the other major currencies as well. According to Alan Ruskin, the Global Head of Deutsche Bank AG in New York, there have been constant speculations that Bank of Japan will do something about Yen’s reduced price, but, the results have not been satisfying till this date. In addition, whatever actions that Bank of Japan have taken, are doubted by the investors, therefore, turning the situation worse. The expansion of Bank of Japan’s Balance Sheet is still modest if that is compared to the expectation set by Federal Reserve.
Incidentally, Bank of Japan has recently (30th October) increased the asset-purchase program by 1 trillion Yen. Currently, the estimated budget of the program is priced at 66 trillion Yen or $822 billion. The bank authorities have announced that the bank and the Government will put in their possible effort and ensure that deflation is handled as soon as possible. Masaaki Shirakawa, the Governor has already called for a board meeting on 19th November.
Yen is now at 80.20 per USD and 10.28 per Euro. Yen’s drop against Euro also is the biggest since 14th September. When compared to Pound, 1 Yen is equivalent to 0.0079 GBP.
The fate was different altogether for the South Korean counterpart of Yen. The major South Korean currency South Korean Won has risen against all the major currencies and is currently at a record 14 month high against USD. Kim Choong Soo, the Governor of Bank of Korea has expressed hope that the economic growth of this Asian country will be back on track in 2013, along with the improving global conditions. This statement of Soo was good enough to result into some positive sentiment for South Korean Won. The currency has gained 0.4% and is priced at 1085.05 per USD.
New Zealand Dollar which is nicknamed as Kiwi because of the image of the flightless bird on the one dollar coin has weakened against all the counterparts. The retail sales of New Zealand were expected to see an increase of 0.4%, but it actually dropped by 0.4% in the 3rd quarter of 2012. This has caused negative sentiment for New Zealand Dollar as it plummeted by 0.8% against USD.
The trade-weighted index of New Zealand Dollar has also dropped to 73.12 from its previous value of 73.37. Westpac Banking Corp.’s Senior Currency Strategist, Richard Franulovich rightfully stated that the recent statistics coming out for this South Pacific nation is anything but encouraging and these show that the economy of New Zealand is still not balanced properly. He stated that he won’t be surprised if the Kiwi Dollar shows some further decrease in near future.