The Japanese yen has been on the longest losing streak against the dollar in seven years as Japan’s economy is showing signs of trouble and there are rising bets that the country’s central bank will take steps to stimulate the economy.
Dollar accelerated gains against the yen in the early Asian trade, reaching the key 80 level for the first time in three months.
The yen’s decline gained momentum on Monday after data showed Japan’s trade deteriorated as exports from Japan fell to the worst level since the May 2011 earthquake. This is evidence that Japanese manufacturing is under serious competitive pressure.
The Bank of Japan’s latest Tankan survey, a business confidence survey, showed that the index had fallen all the way to -17 from -5, its lowest level since January 2010.
The recent disappointing data has led Japan’s economy minister Seiji Maehara to call on the Bank of Japan to do more. This has raised speculation that the BOJ will ease policy further in its meeting next week. By increasing its bond-buying programme, this will have a weakening effect on yen.
All these factors have made yen become less attractive as a safe haven asset recently and is causing a yen sell-off.
The dollar is forecasted to strengthen beyond the key 80 yen level and even up to 82 yen by the year end.
Of course if the Bank of Japan disappoints at its meeting at the end of the month dollar is expected to pull back sharply.