No yen for risk

Wines & Vines,  June, 2008  by Chris McMahon

• E-mail
• Print
• Link

The Japanese yen is wilting again, primarily due to U.S. dollar strength, says Jason Yu, chief currency strategist for ODL Securities. He says former Fed chief Alan Greenspan's recent comments that the credit crunch is easing, even while the housing market continues its decline, and the stabilization of the S&P 500, have put a floor under the USD/JPY. "Capitulation day was the Bear Stearns' collapse on March 17," he says. The USD/JPY hit bottom at 95 that day and since then it has traded in an upward channel. Support is 102.50 and resistance is 107.50, he says.

[GRAPHIC OMITTED]

"Japan has been craving inflation for the past 10 years and they are getting it now at the worst possible time and it's coming from the worst place possible," says Kathy Lien, chief strategist for FXCM. "It's not coming from robust domestic demand spurring prices; it's coming from commodity prices, speculation and falling supplies."

In addition to the yen's correlation with U.S. equities, Japan is a huge oil importer, so the yen is suffering from weakening economic conditions as well as a drop in global risk appetite. She says the yen will trade in the 101.50 to 104 range until the end of June.

COPYRIGHT 2008 Wines & Vines
COPYRIGHT 2008 Gale, Cengage Learning