EXCHANGE RATE IMPLICATIONS

Exchange Rate Implications



Exchange Rate Implications

Introduction

It was the World War 2 when Yen start losing its value, and after a long period of instability in the value of yen, the value was fixed in 1949 with 360¥ per 1 US dollar. It was done according to the old Bretton wood System to stabilize the prices in the Japanese economy. The prices were unstable and fluctuation was observed continually due to the worst condition of War. The floatation and ups and downs continued in the exchange rate of yen against the Dollar.

If we analyze the trend of exchange rate of Japanese Yen in against the Dollar the we see that in 2002 the Dollar was much expensive then of Yen, but to the Afghan-America war we can observed that the Dollar is losing it worth in against of Yen. As of 2012 the current exchange rate of Yen against the Dollar is 82.6861 only.

Year

Exchange Rate

2002

132.628

2003

118.813

2004

106.269

2005

103.341

2006

115.586

2007

120.381

2008

107.944

2009

90.4212

2010

91.3166

2011

82.6861

2012

78.647

Factors Affecting Yen Forex Fluctuation

Japan after the earthquake and tsunami face several problems. The international financial markets were significantly affected by these calamities, similarly Japanese Yen was also affected as it witnessed severe fluctuation because of uncertainity in the market. You can see, with the disclosure of the details of the disaster, as well as nuclear leak escalating crisis, the yen is not only not declined, but rose sharply to a record high at some instances. Investors and stakeholders were not completely aware of what was going in the market and what to expect.

Generally speaking, the exchange rate depends upon their fundamentals for currency appreciation or depreciation like supply and demand. However, yen has always been free from the constraints of this rule. Throughout the yen's performance over the years, whether it is the 1995 Great Hanshin Earthquake, or the sudden stroke of Japanese Prime Minister Keizo Obuchi died. The Bank of Japan for many years implemented zero interest rates and quantitative easing. There is no obvious reason why yen witnessed a negative impact. After the Kobe earthquake, the yen even rose for three months as the exchange rate rose from 98 to 80 mark.

The current round of yen rise is caused by speculative funds betting on yen rise. After the earthquake, the yen short-term, once down, the so-called "knee-jerk reaction, were based on past historical experience. If the trader will immediately make the yen decline, the trend will not last for long.

Exchange Rate Implications

After a long period of overvaluation Dollar real trade tradable value decreased by thirty percent between mid-2007 and early 2009, that was measured below the average value. The currency has gained a lot of positivity in the light of considerable instability. In the absence of proper maintenance strategy for the main global currencies in volatile economic conditions, currency markets have suffered hefty losses. Central Banks is the only hope in this particular situation that can launch efforts in solving the currency problem. However, the most important factor in this situation is the implementation of a suitable ...