Yearning for the Yen

UK (SANEPR.com) May 07, 2008 -- The disease that has struck the dollar over the last 12 months has shown signs of spreading further. The US economy was the first to show signs of cracking with slowing growth and recession warnings; but if the Dollar was patient zero, the contagion has now spread says Michael Wright of Betonmarkets.com.

Much was made of the Pound's strength against the Dollar when the exchange rate blasted through two dollars to the pound. However since November, the UK economy has also started to show signs up weakness sending the pound crashing 7% from its peak in 2007.

Last week it was the Euro's turn to falter, falling hard on lower growth concerns. The chief beneficiary of the latest selling has been the Yen as traders look to profit from interest rate differentials.

Much attention was paid on Bernanke's testimony last Thursday before the House Budget Committee for insights into what can be done to help blunt the ill effects of a deep housing slump and a credit crisis. The big worry is that those problems will force consumers to clamp down on their spending and businesses to put a lid on hiring, sending the economy into a nosedive.

Over the last two weeks the USD/JPY has fallen from its perch above 110. Mainly on the rumours that the FOMC will be cutting rates twice during the month of January.

However when Ben Bernake didn't deliver on that assumption, it sent the USD/Yen pair from 106.00 back above 107 causing a lot of pain for traders who were short the Dollar against the Japanese currency. There will almost certainly be a cut at the next FOMC meeting at the end of the month, but the trillion Dollar question is how big this cut will be.

While the USD/JPY is trading higher now, the over all trend is down, creating a potentially profitable opportunity for currency traders.

With Betonmarkets.com you can take buy a no touch option which compensates the trader for predicting which level the currency pair won't touch during a predetermined time frame. A 'no touch' on the USD/JPY with a 14 day term and the no touch level set to 110.50 Could return 12% ROI. This means you are predicting that the USD/ JPY won’t touch this level over the next 14 days.