Yen Posts Weekly Drop on Poor Interest Rate Outlook

Japanese yenThe Japanese currency posted a poor performance this week as the economic recovery prospect is not leading traders to believe that interest rates will be raised from an all time record low, decreasing significantly the attractiveness for the Asian nation’s currency.

Several negative reports affected the yen’s outlook as consumer prices declined in Japan during the past month, and the nation’s unemployment rate grew for the first time since July, being both reports extremely influential to fuel speculations that interest rates in the country will remain at an all-time record low, as the Bank of Japan is likely to insist on low borrowing costs to accelerate the pace of recovery in Asia’s wealthiest country. The greenback also declined versus the several currencies this week, as the outlook for interest rates hikes in the U.S. declined on Federal Reserve rather dovish statements.

The Japanese economy is affecting the yen’s performance directly, according to analysts. A solid paced improvement in the nation’s economic conditions declined slightly towards the end of the year, declining expectations that a more attractive monetary policy will be implemented anytime soon, declining the appeal for yen-priced assets in currency markets.

EUR/JPY closed the week at 131.68 from as low as 129.45 in the beginning of the weak.

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