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The yen rallied today, regardless of the damning data and reports coming out of Asia which all but confirmed the economic slowdown in China and a 5.8% decrease in Japanese exports. The yen advanced on the back of investors and traders seeing the country as a safe haven on a day when the US markets slid almost uncontrollably. The gains were made even more impressive by the fact that a round of quantitative easing was announced by the Bank of Japan just 24 hours prior to the rally. The injection of 10 trillion yen into the economy was expected to have a lasting effect on the currency, driving down demand and ultimately strenght. However the funds, which have been earmarked for purchasing assets and government debt, have barely made a dent in the price of the yen which has plowed on regardless, potentially undermining attempts to spark economic growth.
It is thought that the central bank had actually hoped the yen would lose value, as this makes Japanese exports cheaper to make and more profitable when sold on the international market.
The euro’s fall has been the biggest decline in the last two months for the 17-nation currency. The drop came on the back of data being released reaffirming the fears of many; a decline in the continents services and manufacturing sectors. The general feeling around the markets and currency exchange offices is that with such declines is key areas such as services, which have become a staple in the average Europeans economy since the emergence of Asia as a manufacturing hotspot, the European Central Bank will need to either provide a lot more stimulus or change its approach to the financial crisis entirely.
Since Mario Draghi took over as president of the European Central Bank late last year, hundreds of billions of euro’s have been pumped into the economy through various programmes. After his announcement last week confirming the introduction of more government debt purchasing, it seems unlikely that investors and traders will be readily willing to invest in the currency knowing full well that a downturn could always be around the corner.