Greenback falls to another 15-year low against the Japanese yen; Economic sentiment for Germany takes surprising dip

Sept. 14, 2010 | Written by Jeffrey Winograd

Ruling party’s backing for P.M. Kan a key factor – The U.S. dollar today again hit a 15-year low against the Japanese yen before recovering, at its lowest point being traded at 83.07 JPY. Stop-loss orders were reportedly at the level of 82.85 JPY. Forex traders are pondering why this happened and what is in store for the remainder of the week. Sentiment resides with today’s decision by Japan’s ruling Democratic Party of Japan to retain Prime Minister Naoto Kan at its helm. In past weeks, Kan has been hinting that his government, perhaps hand-in-hand with the Bank of Japan, will intervene. However, Kan was considered more likely than his opponent to hesitate before making the jump to intervention. In addition, the forex market can’t be sure that there will be help in the international arena – cooperation that is considered essential. At press time (8:50 a.m. in New York), the USD/JPY pair was trading at 83.2450.

Disappointing news on outlook for Germany – The latest key economic indicators coming out of the euro zone are not especially encouraging for the health of the euro. The ZEW (Center of European Economic Research) Indicator of Economic Sentiment for Germany declined by 18.3 points in September. It now stands at minus 4.3 points, a precipitous drop from 14 points in August. This marks the lowest point for the indicator in 19 months. It has an historical average of 27.2 points. The ZEW reported that following strong Q2 growth, German industrial production stagnated in July. The report noted a decline in incoming orders. “This may not only indicate a temporary slowdown but could well be the first sign of a flattening of economic activity” ZEW said. Meanwhile, Eurostat has reported that in July, compared to June, seasonally adjusted industrial production remained stable in the euro zone, with production falling by 0.2%. It should be noted that in July, compared to July 2009, industrial production increased by 7.1% in the euro area. At press time (8:50 a.m. in New York), the euro was trading at $1.2854.