Forex Trading Strategies Blog

It has been widely expected that the Bank of Japan (BoJ) is set to end its loose monetary policy regime and begin hiking interest rates gradually. However, a new statement by the Japanese Prime Minister Koizumi has reversed the market’s expectation. The PM’s statement suggests that he feels that it may be too early for Japan to start raising interest rates.

This along with corporate news that General Motors might sell its entire 20 % stake in Suzuki led the Yen to weaken against major currencies like the US dollar and the Euro. This sale would have meant that a huge amount of US dollars would be exchanged for the Yen so that GM could withdraw its investment. Thus, this transaction will exert a downward pressure on the Yen.

Japan has been running a zero percent interest regime for sometime now and the country’s central bank had hinted last month that it is planning to reverse this trend. The Yen had appreciated on this news. But, with the Japanese PM portraying a different point of view, the Yen is likely to display a confused trend until the BoJ announces its next interest rates on Thursday, March 9.

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