Japanese Yen May Strengthen as AUD Weakens on FOMC Policy Pre-Positioning

At the start of the trading week, the Forex market was trying to gain ground, as major currencies were showing little to no changes against the US Dollar. The Asian stock exchanges, including the Japanese Yen, are pushing higher, which reflected a reactionary upward push on Wall Street rather than new optimism last week.

During the start of the week, the economic calendar was seen to be evidently quiet, which hinted that it is likely to continue. It was the effect of the FOMC policy announcement on pre-positioning, which many experts assumed to “open the door for a cautiously risk-off mood as the day progresses.” The Japanese Yen is projected to rise in value along with other Asian currencies, while the Australian Dollar will get badly hit by the pre-positioning policy.

Japanese Yen Bills

Although it’s showing positive results in the forex market, JPY is considered a volatile currency in the world. To keep it stable and artificially at a low level, the government and Bank of Japan (central bank of the country), implemented a “dirty float” policy concerning currency management, which also helps the export sector and the over-all economy of Japan.

Based on an FXCM published post, one of the known currency volatility drivers of the Yen is the pricing of commodities, in particular, oil and energy. An example cited was the effect of crude oil pricing on the JPY’s exchange rate.

“This means that the yen would logically be expected to increase in value if crude oil decreases in value,” the resource page said.

Currently, oil and gas prices worldwide are still unstable, leading many experts to predict that the Yen may soon rise in value, making it a valuable investment for many.

While the Yen became a safe haven for currency traders, the AUD along with the NZD (New Zealand) and CND (Canada) have lost ground this week. The National Australia Bank revised its forecast on where their currency will be by the end of the year, which is from US74 to US72.

Investors fear that the Greek crisis, sell-off of Chinese equities and decline in commodity prices could lead to a more dramatic slowdown in Australia, New Zealand and Canada’s economy,” said Kathy Lien, foreign exchange stragist at BK Asset Management.

The outcome on the AUD, CND, and NZD’s currency value worries many of its capping gains, as they value its effects on equity and gold prices. Experts state funding on currencies such as the Japanese Yen may give traders an “higher edge in this scenario.”