Due to investor pessimism regarding the recovery of the global economy, last week the exchange rate of the yen against the dollar reached its highest level in 15 years, and against the euro in nine years, but by the end of the week it lost those gains as Japanese authorities threatened intervention.
After a turbulent week, the euro exchange rate against the Japanese currency remained almost unchanged on a weekly basis at 108.80 yen, while the dollar price against the yen fell by 0.43 percent to 85.23 yen. The exchange rate of the European currency against the American currency, on the other hand, rose by 0.19 percent to 1.2733 dollars. The dollar index, which shows the value of the American dollar against six major world currencies, weakened last week by 0.34 percent to 82.88 points. Pessimism regarding the recovery of the global economy caused instability on global stock markets last week, prompting investors to seek safer havens for capital, such as investments in the Japanese currency. As a result, on Tuesday the euro price fell to just 105.44 yen, the lowest level since November 2001.
The dollar exchange rate, on the other hand, slid to just 83.60 yen, the lowest level in 15 years. "Increased pessimism regarding the prospects for the global economy is reflected in the usual trends in the currency markets. After the important level of 85 yen was breached, there is a real possibility of the dollar falling to 80 yen, which would significantly harm the Japanese economy unless something is done in fiscal terms or new monetary easing measures are adopted," said Credit Agricole analyst Mitul Kotecha. However, investors have become cautious after Japanese Finance Minister Yoshihiko Noda warned of the possibility of intervention in the currency markets if necessary. He also warned that the movements of the Japanese currency have recently been one-sided and that fluctuations could harm the stability of the economy and the financial system.
