Published: Tue, 03 Mar 2009 20:52:20 +0100

Japanese Yen Falls Lower on Economic Uncertainty

(CEP News) - USD/JPY is trading near recent highs and a weaker outlook for the Japanese economy could lead to further losses in the yen, according to currency strategists.

The U.S. dollar has made significant gains against the Japanese yen on Tuesday following Monday's sharp sell-off. USD/JPY continues to hold on to major gains, trading above 98.00 JPY. The cross has seen a steady rise since hitting session lows at 97.00 JPY in overnight trading. The yen is one of the worst performers against the U.S. dollar on Tuesday.

Comments from Bank of Japan members could have caused the sell-off, according to currency strategists. BOJ Governor Masaaki Shirakawa spoke to a parliamentary committee, and said the economy is weakening faster than he expected.

Meanwhile, BOJ executive director Hiroshi Nakaso said the central bank needs to consider the risk that buying stocks may harm the Japanese financial markets.

Dennis Gartman of the Gartman Letter said that after the last two days of consolidation of USD/JPY, he is looking to add to his short yen positions.

Per-Erik Karlsson, head of trading operations at Advantage Financial, said in his daily report that the momentum continues to support the U.S. dollar. He is looking for USD/JPY to test 100.54.

"The correlation between stock prices and JPY is totally gone and seems to be more focused on the struggling Japanese economy over the last few weeks," he said.

Sascha Tihanyi, currency strategist at Scotia Capital, is not as confident that the U.S. dollar will move higher against the yen. He said that fundamentally, USD/JPY should be higher, but the recent moves seem to be a little overdone.

"I think we moved too high too soon and I don't think this level is sustainable," he said. "I think I am more comfortable with the [USD/JPY] trading around 95."

Euro/USD up 0.05 cents to 1.2583

USD/CAD down 0.21 cents to 1.2912

USD/Yen up 0.83 points to 98.28

GBP/USD up 0.17 cents to 1.4071

AUD/USD up 1.18 cents to 0.6419

Euro/Yen up 1.07 points to 123.65

Euro/GBP down 0.05 pence to 0.8944

GBP/CAD down 0.14 cents to 1.8164

CAD/Yen up 0.76 points to 76.12

Euro/CAD down 0.19 cents to 1.6247

The U.S. Dollar Index is down 0.03 points to 88.92

All data taken at 2:45 a.m. EST

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca