Yen Weakens On Moody’s Debt Downgrade

The difficulties faced by the Japanese government and the Bank of Japan in restoring the economy to full health have not gone unnoticed by the world’s major credit rating agencies with Moody’s recently downgrading the country’s sovereign debt rating from AA3 to A1 and assigning Japanese debt with a “stable” outlook. That led to the Japanese Yen slipping to a 7-year trough versus the U.S. Dollar in relatively volatile trading. The Yen has been under relentless pressure given the Bank of Japan’s goal to encourage trade via a weaker currency, and the debt downgrade did nothing to alleviate that pressure; analysts point out that the market’s response to Moody’s announcement was the typical knee-jerk reaction but believes that savvy investors will see that this is nothing but an opportunity for USD/JPY long bets.

As reported at 9:19 a.m. (GMT) in London, the USD/JPY pair was trading on the EBS platform up to a 7-year peak at 119.15 Yen, a level not seen since mid 2007; profit taking sent the pair lower to 118.35 Yen, a 0.2% decline. Meanwhile, the EUR/JPY was lower at 147.6160 Yen, falling from a session high of 148.1809 Yen.

Eurozone PMI Disappoints

In the Eurozone, the Euro fell against the greenback on growing expectations that this week monetary policy will be further eased by the European Central Bank in order to better combat the threat of deflation. The most recent data for November, specifically the PMI surveys of France and Germany which are, together, the Eurozone’s economic powerhouses, both showed readings below the 50.0 threshold indicating contractions in the sector.