The US Dollar (USD) has continued to rise against the Japanese Yen (JPY) today after rapidly climbing yesterday, as currency markets recovered from their kneejerk reaction to Donald Trump’s unexpected victory in the US presidential elections.
US Dollar (USD) Advances as Trump Sentiment Unexpectedly Upbeat
The advancement of the US Dollar Japanese Yen (USD JPY) exchange rate was certainty not the expected outcome of a Trump presidency ahead of the election. Investors had widely predicted that a win for Trump would be catastrophic for the US Dollar, causing markets to flee to other ‘safe haven’ currencies like the Yen in the chaos that would follow.
While initially this did appear to happen, USD quickly rallied again as investor confidence was bolstered by Trump’s victory speech. Markets reacted positively to the speech which struck a more ‘presidential’ tone as Trump reined in his usual wall-building rhetoric.
However there is still a lot of uncertainty surrounding the new president elect as investors wait to see just how many of his bold campaign claims will actually evolve into fully formed polices once he is sworn in next year.
Japanese Yen US Dollar (JPY USD) Falls on Trump Implications for Safe-Haven Assets
Japanese policy makers will be thankful that the US Dollar wasn’t subjected to a Trump slump as had been predicted before the election, increased demand for the Japanese Yen would likely have undone a lot of the work that the Bank of Japan (BoJ) has done in recent weeks to lower its value.
Trump’s victory is likely to remain a problem for the Yen however, as the uncertainty of his presidency could still cause traders to flock to the ‘safe haven’ currency causing major problems for the BoJ’s plan to control the government-bond yield curve.
Then there is also the problem that Trump may seek to bin the Trans-Pacific Partnership, which could have provided the catalyst for reforms in Japan’s economy.
USD JPY Forecast: Exchange Rate likely to see Increased Volatility For Remainder of 2017
The US Dollar Japanese Yen exchange rate is highly likely to see some significant fluctuations ahead of Trump’s inauguration in January as Trump begins choose his cabinet and lays out his plans for his first term in office.
Investors will also be waiting to see if the Federal Reserve decides to hike interest rates in December as had been widely predict before the election, or whether it will seek to delay it due to the economic uncertainty surrounding Trump.
Meanwhile Japan will release its third quarter GDP report next week, which may cause the Japanese Yen to rise further should figures be higher than forecast.
Current Interbank Exchange Rates
At the time of writing the USD JPY exchange rate was trending around 1.06 and the JPY USD exchange rate was trending around 0.094.
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