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Justin Kuepper

Has the Yen Fallen Too Much?

By February 8, 2013

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The Japanese yen has fallen by around 16% versus the U.S. dollar since November, amid speculation that new Prime Minister Shinzo Abe would implement aggressive monetary policy to weaken the currency. But, recent comments by Finance Minister Taro Aso suggest that the rapid decline took many in the government by surprise.

So, what does that mean for forex traders and international investors? The surprise may suggest that Japan's monetary easing goals may not be as extreme as once thought, meaning that current levels may in fact be the target level. If that's the case, the yen may form a base at its current exchange rate and eliminate the short opportunity.

International investors should also note that the yen's stabilization could mean stabilization in the country's stock market and a reduced need to hedge portfolio positions against a yen decline, as was previously the case.

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