Reuters Insider - Dollar/yen levels a buoy or anchor for Japan?

Canon Electronics

08/12/2014 05:54

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        Currency trading in New York saw the yen hit 120  
                     to the dollar and further weakness may be helping 
                     Japan’s economy. Yonggi Kang reports.             
 
 
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Transcript (May be auto-generated)

 The Yen briefly hitting 120 against the Dollar in New York and creating at its 
weakest in more than seven years. The question is, how much lower can it go? The
softer currency so far seems to be doing more good than harm for Japan's 
economy. The stock market rallying to a near 7.5-year peak and it's also 
boosting profits at exporters like Toyota and Canon. But not everyone's happy. 
Smaller companies are complaining that the cheaper Yen is boosting raw material 
and fuel costs. Analysts say this trend could continue as the Yen's rapid fall 
is two-fold, with Dollar strengthening and Yen weakening factors both working 
strongly. Praevidentia Strategy's Masafumi Yamamoto. The weak government policy 
undertaken by the government and the BOJ is combining with the strong US Dollar 
trend. And so out of the major global currency pairs, the Dollar and the Yen are
showing a very sharp contrast which makes it easy for speculative money from 
around the world to gather. The currency market has a tendency to overshoot so I
think there's a great possibility that the Yen will weaken to 122 by the end of 
the year. Other experts say the latest Yen weakness is overdone. Mitul Kotecha 
at Barclays. Near term, we would actually argue that Dollar-Yen looks like it's 
becoming stretched in terms of the move. Our view is that the Yen is already 
very extremely undervalued and that the downside risk for Dollar-Yen now is 
becoming much more limited. So we wouldn't see Dollar-Yen pushing too much 
higher from current levels. Still, many forex dealers expect the Yen to weaken 
further at least in the near term. And if there's any potential turning point, 
there will be the general election on December 14