USD/JPY: Yen Defeated by US Economy’s Steady Recovery

Another trounce was seen from the Japanese yen in yesterday’s Asian session as uncertainties of Japan’s on-going elections clouded investor’s assessment of the USD/JPY. Japan’s political crisis versus America’s housing market gauges rising and retailing industry expanding, signs that the US economy is continuing to strengthen, led to the abatement of the Yen by 84 pips versus the Greenback.

In the run-up to the Lower House election on December 16, the Prime Minister Yoshihiko Noda was unable to achieve a breakthrough in improving ties with China and South Korea. Noda may have been hoping for a diplomatic success by mending relations with the two countries, which have been worsening over territorial disputes though failed and resulted to more criticisms. Noda’s decision to travel abroad immediately after dissolving the Lower House led disparagements to grow even within the ruling camp.

Meanwhile, the buoyant projections were reported by more Americans this month. The world’s largest economy is believed to improve than at any time in the past decade, led by a surge among Democrats following the re-election of President Barack Obama as stated in news reports. In effect, the optimistic perception of Americans is deemed to bring about a positive contagion throughout the economy, consequently to the US dollar.

Hence, with Noda’s DPJ facing possible defeat in the December 16 elections versus the US economy’s expected recovery, a long position is measured apt for the USD/JPY pair.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.