Fx Strategies In 2006: U.S. Dollar Vs. Yen

1. Assume it is April 1st 2006. Based on the case, build a compelling case for buying or selling JPYUSD analytic thinking of the Current website During the premier(prenominal) half of the decade of the 2000s, the USD had appreciated. In 2005, the USD went against each predictions of the prognosticators and rose. Despite a terrible current fib dearth (USD800), the USD is heading towards a 140 JPY/USD level. There ar 2 main reasons to explain the USD level in 2005. The first wizard is that thanks to a rising pastime enounce insurance policy led by the FED (4.75%), the USD rose. and so high pastime raises attracted Foreign Direct Investments (FDI), for example when the fossil oil determine increase a lot of oil export countries legitimate a surplus in dollars and invested this surplus in US treasury bonds, and it helped to keep a strong USD. In the same(p) ti me, the bank of Japan (BoJ) kept its pursuance rate irritated to zero. But expectations atomic number 18 not very confident for the USD. In fact, high interest rate leads to an increase in the currency which attracts FDI but it hurts exports. In 2005, the US current account shortage was heading towards USD 800 billion. With such a deficit, the US wont be able to sustain a strong USD.

We atomic number 18 going to develop 2 scenarios. The first one capitulum on describe a situation where the USD depreciates against the JPY, after the BoJ increase its interest rates. The second one will describe a situation where the USD will appreciate against the JPY thanks to low interest rate s in Japan. Scenario 1: BoJ interest rate! grows up to 4.25% In this scenario, we assume the dollar is going to depreciate against the yen. Therefore, we are considering a situation with high interest rates colonized by the Bank Of Japan (BOE). Our assumption would be a rate set at 4.25%. This situation will indicate divers(a) consequences for the different indicators and actors of the financial economic scene. First of all, this will be a bad...If you want to get a full essay, found it on our website: OrderEssay.net

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