US vs. Japanese discount fund rate
Forex July 1st, 2009
The spread amongst U.S. and Japanese interest rate anticipations remain to be on the side of US dollar at +68, as markets forecast no chance of tightening from the Asian side. Though, yield anticipation has usually had small significance in price decision. Even though, one can conjecture that an increase in U.S. interest rate anticipation would affect the exchange rate as the US dollar would weaken its position as the favored funding currency, going back to the throne to the yen. Following flows can substantiate a bullish USD/JPY circumstances.
Japanese officials lately allowed a 10 trillion yen deflation-fighting stimulus program intended to stabilize interest rates which could be an important part for the currency in the long run. In the meantime, risk trends keep on holding the position of a key driver for the pair and a bout of risk aversion could supply support as it would produce safe haven flows back into the Asian currency.
