Ahead of Donald Trump’s presidential win, it seemed that Bank of Japan Governor Haruhiko Kuroda takes this as an opportunity.
Given the idea that the yen is expected to rally after Trump’s victory set off a dash for haven assets, with the currency posting declines two days after the vote, reaching a three and a half-month low.
In addition, the most awaited fiscal stimulus in the U.S. has driven a sell off in Treasuries, which has sent the U.S. yields to test peak levels since January 2014 in relation to those on Japanese government bonds and fueling the American assets.
Hence, Kuroda took the news positively as a weaker yen could help his efforts to restore domestic inflation.
According to a research team at BBH, the US dollar gained by almost 5.75% off Wednesday’s low to push through the 200-day moving average amid earlier session for the first time for fiscal year 2016.
Japan’s IT Giants Worries on Strengthening Yen
After reporting the financial earnings for the first six months, the Japanese leading information technology companies are all eyeing foreign exchange rates with disappointments on further volatility amid the U.S. presidential election.
"This is the second surprise this year, after Brexit," said NTT Data President Toshio Iwamoto.
The markets and businesses wildly reacted, with exchange rates terribly shaken. The yen was also seen riding on a roller-coaster even though the election results rolled on Wednesday, with the currency resting at about 106 level against the greenback Thursday evening.
As the yen continues to strengthen, it has driven a shadow on full-year estimates by some companies. Sales of Fujitsu declined by approximately 70 billion yen from an earlier reading in July.
Further, the acquisition of IT services operations from Dell is expected to boost full-year sales by about 20 billion yen from the guidance claimed at the beginning of fiscal 2016, according to NTT Data. Sales
Yen Expects to Rise to 90 Against Dollar Under Trump
The yen is expected to reach as high as 90 per dollar within six months of Donald Trump’s election results, according to Japan’s top currency official Eisuke Sakakibara.
Current Stance of USD/JPY Pair
The chart below illustrates USD/JPY price action amid wobbly markets ahead of Donald Trump’s presidential win.
Given a bullish tone of the pair, market participants could now open for Buy position as the dollar is widely expected to decline, which would send its counterpart to edge higher. In addition, the trend’s third candle suggests investors for Buy position as it is expected to rally further.
With Trump’s presidential win, markets and businesses were tremendously shaken, suggesting a weaker dollar policy. We conclude that the gradual greenback weakness and strong yen are likely to continue.
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