Yen Experiences Slight Increase against USD amidst the Speculation of the Drop Being Overdone

The major currency of Japan, Yen has rallied against the USD to come out of the 20-month low figures. The economists believe the monetary easing bets were able to get the Japanese currency way below and that too very fast. The incoming Prime Minister of Japan, Shinzo Abe stated that he may revise the Central Bank law if the Bank of Japan is not able to increase the inflation target to 2% from the current 1% after the scheduled meeting concludes on January. Shinzo also stated that to spur inflation and growth, he may go with the unlimited monetary easing policy, if needed. The Yen actually slumped to 85 per USD after these announcements. Incidentally, Japanese money market was closed on 24th December, but has reopened on the Christmas day, when most of the other markets are closed.

Yen is currently at 84.85 per USD and has advanced by 0.1% so far. It also gained against Euro by 0.1% and is at 111.86 per Euro currently. Only yesterday, it experienced a slide of 0.8%. The 14-day relative strength index of Yen has been below 30 against Euro, since 12th December. On the other hand, the RSI against USD has also gone down to 22.

Shinzo is the leader of the Liberal Democratic Party which came into power in the lower house elections held in December. The party has already come to an agreement with the New Komeito Party on a political package which includes 2% inflation goal. Liberal Democratic Party does not have the required number in the upper house, but, as it has signed the package with Komeito, the chances of the package becoming a law have shined further.

The Senior Vice President of the Foreign-Currency Sales Department of Mizuho Corporate Bank, Michiyoshi Kato stated that apart from the comments made by Shinzo, the limited liquidity in the market may also have played a major role in the downfall of Yen. He added that Yen was mainly sold off in front of the key resistance levels.

The consumer prices in Japan have went down by 0.1% in November, if compared to the results of October. This statistics however does not include the fresh food prices. The core-inflation rate of this Asian country has seen average fall of 0.2% every month throughout the past decade.