The forex market, as of late, has been in a constant state of flux as prices for various countries continue to rise or fall. And as various countries continue to struggle with their currency, the US continues to dominate the foreign currency market.
Through a combination of international laws and unique global conditions, the dollar index continues to rise. A direct consequence of that rise in the dollar has been that the Japanese yen has fallen considerably.
In fact, the yen managed to reach a 32-year low of 148 against the US dollar. And as conditions worldwide continue to escalate, the yen could possibly reach an all-time low of 150.
Therefore, Forex traders are patiently waiting to see how Japan will react to the developing situation and its deteriorating currency. Unfortunately, their response likely could have been much better.
Japanese Chief Minister Responds
In the past week, the Japanese minister has been very vocal about the continuously deteriorating state of the yen. As it reached a 32-year low of 148, it marked nine consecutive weeks of losses.
The Chief of Finance said that the current situation was very concerning, as the rising volatility of the foreign currency market meant that Japan’s chances to make a comeback were narrowing.
He would also say that the relevant authorities were ready to take the necessary action to help the yen recover.
However, these statements did not inspire much confidence among traders, as the Finance Chief did not specify what the bold action was or how they planned to improve their currency despite the falling prices.
One of the speculations that Japanese officials have made is to improve domestic production, which can allow the country to significantly reduce its overall dependence on its foreign currency reserve. With that being said, they have not disclosed any plans on how they will go about executing it.
Saving Face
These strong words uttered by Japanese officials have just been the latest in a series of major warnings that they have made over the speculative nature of currencies right now.
Furthermore, the comments that they made were also in an effort to dissuade any investors from questioning their intervention strategies.
The country had to intervene for the first time in almost two decades, as prices for the yen were sliding down from 145 against the dollar.
Responding to Mounting Pressure
Many analysts believe that 150 against the dollar is a very important psychological threshold for citizens and traders alike. If Japan falls below that mark, then there will be mounting pressure for them to make faster decisions to better stabilize the currency.
Regardless, it remains to be seen how Japan will eventually react as pressure continues to mount against it.
