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Yen Hits 17-Months’ High Against US Dollar, Forecast For Further Appreciation

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(Credit: Kiyoshi Ota/Bloomberg/Getty Images) Japanese 10,000 yen banknotes are arranged for a photograph in Tokyo, Japan, on Wednesday, July 22, 2015. The yen slipped 0.1 percent to 124.03 per dollar after better-than-expected data on U.S. housing and a continuing commodity rout boosted the greenback.Illustration Of Japanese Yen Notes
April 8
6:51 AM 2016

The Japanese yen has reached to its strongest level on Tuesday hitting a 17-month high while threatening to undermine Bank of Japan's (BoJ) push for inflation. Increase of inflation up to its predefined goal appears as a key effort for the Japanese central bank in reviving the world's third largest economy.  

Japanese currency has been witnessed to strengthen as much as 1.1% to ¥109.98 against each dollar in London during late hours on Tuesday. Analysts observe, yen hasn't appreciated to such an extent since October 2014.

Meanwhile, yen has reportedly appreciated against a dozen of major currencies. It has recorded 1% gain in value and rxchanged at ¥125.61 per euro.

However, renewed strength of yen is believed to cause trouble for the BoJ which has adopted quantitative easing policy aiming to weakening the currency. The ultimate aim is to help Japanese exporters in competition and stir inflation rate lagging behind the target for decades, reports Financial Times.

The appreciation of yen heightens the risk for market intervention by the BoJ. The Japanese government has been observing foreign exchange movements, informs Yoshihide Suga, Japanese Chief Cabinet Secretary.

Meanwhile, Haruhiko Kuroda, BoJ governor has reiterated the possibility for more interest rate cuts. 9% appreciation in yen's value has helped it secure position in the best performing 'Group of 10' currencies, according to a report published in Bloomberg.

Yen is now considered as the classic, risk-free currency. Since the markets are looking a bit nervous, so it's the high time to go for the currency, cites Daragh Maher, head of New York based currency strategy wing at HSBC Holdings PLC.

The 17-months' higher exchange rate for yen takes place following suggestions from the Japanese Prime Minister for cautious intervention to arrest its appreciation. However, the appreciation has caused downward pressure over a broad array of shares including those tied to export and inbound tourism, reports Reuters.

The Nikkei has dropped 2.4% to close at 15,732.82 on Tuesday. The drop leads the market towards 18% drop during this year. The investors have preferred Japanese stocks since long but are now seen reluctant following strengthening of yen and mounting doubts over the progress of structural reform, cites a strategist from BlackRock.

Yen's recent value addition indicates further appreciation. The currency is still cheaper compared five-year average of ¥99 against each dollar, observes Lee Hardman, a foreign exchange strategist from Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

Investors have been considering yen as a safe place for investment since long. But yen's recent appreciations have made the investors cautious fearing market intervention by authorities. Appreciation of yen eventually causes Nikkei average index to continue dropping by further 1%.

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