With the ongoing global changes and the various events impacting financial decisions worldwide, a few currencies have seen immense changes to their status on a global scale. Thus, the focus from the US dollar & Euro has shifted to other currencies like Chinese Yuan, Japanese Yen, etc. The recent strength in the Yen has been cited as unwarranted by current economic fundamentals. Now, amid fears and speculation, the Yen is pulling back.
The Central banks all around the world are ensuring proper security measures in order to overcome any stagnation in the global market. If the Japanese banks have to interfere, that would be to curb the rise in the Yen’s valuation. And if the Yen prices rise, it will adversely affect the Japanese export business. The forex markets are scared of possible Japanese actions. Japanese lawmakers feel a stronger yen will hurt Japanese stimulation efforts.
Japan is also bearing the impact of the declining trend of the U.S. economy. Global markets are slowing down again. According to a recent report, Federal Reserve Chairman, Ben Bernanke, recently said that the Federal Reserve would reinvest monies from housing bonds into more long-term Treasuries. This latest move is to hold strong the already weak U.S economy.
Importance of Yen in Forex
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The Yen (JPY) is the official currency of Japan. It holds the reputation of being the most heavily traded currency in foreign exchange after U.S. dollar and the Euro. Due to its perseverance towards a strong economy the Japanese Yen is positioned just behind the US $ and Pounds Sterling. Reserve currencies (e.g. Japanese Yen) are monies held in significant quantity by governments and institutions as part of their foreign exchange reserves. This money is used as a base for trading in international markets, maintaining common rates for goods.
History of Yen
Yen are the common currency of the country of Japan. Yen literally means, “small round object.” The Spanish and Mexican coins were used in certain local Asian Economies in earlier times, and these coins were designated as the initial form of the Chinese Yuan and Japanese Yen. Eventually, the coins were so abundant that local governments began to mint their own “yen.” The first officially minted Japanese Yen were adopted by the Meji government on May 10, 1871. When first minted, the Yen were based on the standard dollar unit of the time. Yen were to be round coins of silver weighing.
The Breton-Woods act ascertained a secured position for the Japanese Yen to the US dollar after World War II. The Breton-Woods Act maintained currency exchange rates for several decades before being inactivated. The intention towards fastening the Japanese Yen was to stabilize the Japanese economy. Soon, a new agreement – the Smithsonian Agreement – re-assured that the Yen secures a position next to the US dollar. Supply and demand pressures for international currencies soon led the world’s leaders to allow their currencies to float freely on the open market.