Japan’s economic decisions have always been peculiar to the point where they confuse many experts. Yet, the country has managed to maintain a stable economy for many decades. Without following commonplace rules, Japan has managed to stay a major financial force in the world.
However, it’s not without its troubles. Increasing burnout and an aging population present major issues for Japan. Added with its exclusionary politics, where it mostly keeps business within its borders, that spells danger for the Japanese economy.
That’s evident with the country’s currency hitting a 24-year low against the US dollar. The decline in the pair is mostly due to the dollar’s surge than the yen’s decline, but it does indicate a stagnant economy.
As encouraging employment news hit the US, the dollar rallies and recovers some previously lost value. However, Japan has decided to differ from most Asian countries and not spike the cost of borrowing. Of course, that means it also doesn’t follow the US’ trajectory.
The Bank of Japan’s tactic is to keep interest rates low to the ground so they could assist in economic recovery. However, that also has an unwanted effect in forex markets. As long as any currency paired with JPY is rising, it will cause the yen to lose relative value.
Following a report that placed unemployment rates at a two-month low, the US dollar jumped in value. That has had a noticeable effect on the forex market, with the pound sliding about 5% in comparison. The Japanese yen, however, has hit a historic low against the dollar, with USD/JPY hitting 140.23.
As Jerome Powel intends to keep interest rates high for the dollar, impacts in the forex market will definitely be noticeable. If you’re a forex trader, it’s good to keep your eye on dollar pairs and strategize your trades accordingly.
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