Yen gains against the dollar!

February 14, 2007
By Ken Worsley

The yen gained a bit of strength yesterday, after Luxembourg Finance Minister Jean-Claude Juncker said that the currency’s decline was not good for global markets and that carry trades, in which investors borrow low-interest yen to invest in assets denominated in higher-yielding currencies, was, “the biggest threat to the currency system.”

But as the yen gained strength, it did not gain believers across the board. Mitul Kotecha, head of global currency research in London at Calyon, the securities unit of Credit Agricole SA, France’s second-biggest bank by assets, stated:

The rally we’ve seen in the yen is not going to last. The yen is really being pressured just on the fact of having very low interest rates in Japan. The yen continues to suffer from carry trades.

It does, and there seems to be no sign of them abating, when there is so much money to be made from what the G7 ministers called ‘one-way bets’ against the yen.

Of course, despite so much news being made of this gain by the yen, it might be worth noting that over the past 24 hours, the movement has been from 121.80 to 121.30 - 50 pips means something, but enough for a headline? Let’s see where it is a week from now…

Filed Under Exchange Rates