The Japanese yen has continuously dropped from last week till it reached a 5-year low. This highlights a worsening situation for the “haven currency”, compounded by the ever-increasing cost of commodities.
Japan imports a lot of raw and crude material, which includes grains, iron and metals material and also crude oil. This has opened the country to the brunt of increased cost of these materials due to the sanctions which Russia had incurred as a result of its conflict with Ukraine. In January, the country reported its sixth consecutive monthly trade shortage, which amounts to an 8-year high of 18.7 billion dollars which is 2.2 trillion in the Japanese yen. The statistics for the month of February are set to be reported on Wednesday.
As a supposed safe currency, the Japanese yen is expected to profit during periods of unrest, but curiously, it hasn't been so. Instead, the currency dropped in relation with about half of its G10 counterparts in February, despite the rush by global financial investors to haven currencies amidst Russia conflict with Ukraine.
Japan Yen Will Plunge Further With Increasing Importation Costs
According to Yukio Ishizuki of Daiwa Securities Group, the impetus of the USDJPY is upward after breaking past the 114 level. He also said that the currency pair might rise as high as 118.66 on or before May 31st. This is because it is unlikely that the enormous penalties levied against Russia will be removed anytime soon, which leaves the Japanese yen suffering from ever-increasing trade shortages.
USDJPY is currently moving toward a consecutive 6-day loss on Monday, towards 117.88 (which is about a 0.5% loss), its lowest price since the first month in 2017. In some months', the yen will probably dip against the dollar to 118.66, another 1% plunge. This will correspond to its lowest price level since the last month of 2016.
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