Japanese Yen Strengthens as Risk Appetite Fades

Japanese yen is strengthening as risk appetite fades. Lackluster economic data, continued eurozone concerns, and general risk aversion are all sending Forex traders to safe havens like the yen.

For a time, the Japanese yen was weaker on the expectation that the Bank of Japan would increase its easing efforts. Announcements that more quantitative easing would be used as economic stimulus in Japan followed the dramatic announcement of unlimited easing in the United States. The result was a weaker yen.

Now, though, things are changing. Poor manufacturing data has been reported in the eurozone and in China. Concerns about a slowing global economy are taking hold and Forex traders are looking for stability. With risk appetite fading, the yen is in demand. Eurozone problems continue; nothing has been resolved in that arena, and it looks like recession could be on the way.

On top of that, Forex traders are recognizing that Japan’s quantitative easing program just doesn’t pack the same punch as other easing programs. Compared to quantitative easing in other countries, the Bank of Japan’s effort seems inadequate.