Second Week of Gains for Yen, Will BOJ Intervene?

The Japanese yen posted a second week of gains as concerns the debt problems in the US and Europe made the currency more appealing as a safe haven.

Worries about the sovereign-debt crisis intensified after the major rating agencies warned that the rollover of the Greek debt would be considered a default and spoke about possibility of the US credit rating downgrade. The yen climbed against the greenback on the speculation that the Federal Reserve will embark on a next round of the quantitative easing.

The fundamentals in Japan are positive for the yen too. The Bank of Japan said that the economy is recovering from the earthquake:

After declining sharply following the earthquake, production has recently shown clear signs of picking up with the easing of supply-side constraints. This has resulted in an upturn in exports. Domestic private demand has also begun to pick up, with some improvement in household and business sentiment.

On the negative side, the strength of the Japanese currency is a danger by itself as a strong currency may cause an intervention of the central bank to support the nation’s exporters.

USD/JPY fell from 80.53 to 79.12 this week and posted a weekly low of 78.46. EUR/JPY slumped from 114.41 to 112.00, while GBP/JPY dropped from 128.98 to 127.63.

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