US Dollar / Yen - USD/JPY

The flagship couple of the foreign exchange market (Forex) with the EUR/USD and GBP/USD crosses, the evolution of the USD/JPY (American Dollar/ Japanese Yen) cross’ rates have been for a long time mainly influenced by the Japanese’s monetary authorities and government’s (the Bank of Japan and the Ministry of Finance)’ determination to promote the goods and service of Japanese exports by depreciating the Yen for their direct interventions in the Forex or more generally by running monetary policies (in particular low interest rates) that aim to maintain an undervalued Yen. A currency that proposes interest rates quite inferior to the other great currencies’ one will be massively sold by investors who will make massive purchases with the aim of investing in another currency with significantly higher interest rates, the first currency will devalue against the second one (so called “carry-trade” operations).

In a latent but continuous Japanese economic crisis context since the beginning of the 1990s, this low interest rate policy was also justified by the permanent will of a Japanese economic recovery, and the USD/JPY parity slowly but surely went from 80 (1USD = 80 JPY) in 1995 to 134 (1 USD = 134 JPY ) in February 2002.

From 2002 to 2005, a clear adjustment of the “structural” (but done by the market) undervaluation of the Yen led the USD/JPY cross to about the parity 1USD = 100 JPY.

Then the Yen decreased again until July 2007 (USD/JPY = 122), a radical re-apprising of the Yen against the Dollar followed it: USD/JPY = 85 by the end of 2008-beginning of 2009, that is to say more than a 30% re-appreciation in a year and a half.

A formidable bad news for the economy of Japan, which authorities announced, following the example of all the great world powers, the release of a substantial recovery plan in February 2009 (4790 billion Yens in a first time, equivalent to $50 billion).

In this context, the USD/JPY cross seemed to begin to slowly increase during the first 2009 trimester.