Thursday, 17 March 2011

Why Yen increases?

Kathy Lien gives an explanation

The Japanese Yen rose strongly against all of the major currencies, defying the traditional logic that external shocks are negative for an economy and its currency. The Japanese are major global investors and when things go wrong at home, money floods back east.

Aside from repatriation, insurance companies also have to commit funds to Japan for claims and their flows require conversions into Japanese Yen. In response to the sharp sell-off in the financial markets and the strong gains in the Yen, the Bank of Japan has opened up the spigot gates injecting trillions of yen into the money markets hoping that it will stem the selling.

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