The yen dropped to a low of seven months against the dollar on concerns of more easing by the Bank of Japan
November 19, 2012 – On Monday, the yen dropped to a low of seven months against the dollar on concerns of more easing by the Bank of Japan, while the possible resolution of the fiscal cliff in the U.S. helped the euro and other riskier currencies. A rise in the euro also came thanks to the prospects that the finance ministers in the euro zone will agree on a two-year funding program for Greece with the International Monetary Fund.
The dollar held steady with the yen at 81.28 after rising up to 81.59, its highest point since late April. Investors dropped the yen following announcements of elections on December 16 and the Liberal Democratic Party, which many believe will win, said the Bank of Japan should print an unlimited about of yen and set new prices at zero or less.
However, investors were worried about pushing it a great deal lower prior to the BOJ policy announcement that is due on Tuesday, where many believe the Bank will keep from announcing new monetary easing.
Analysts said that questions and continual talk about possible changes from the BOJ has weighed down the yen. Most believe the BOJ will not make any major policy changes in this meeting. However, the trend is starting to change.
The euro was up by 0.2% to $`1.277 which was an improvement off its low of two and one half months of $1.266 of last week. However, it was still below its moving average of 200 days of $1.2807.
One policy maker at the European Central Bank said over the weekend that the euro zone this week should agree to a funding of two years for Greece, while Wolfgan Schaeuble, the Minister of Finance for Germany said he was nearly certain the deal would be agreed upon.
However, on Tuesday at a meeting of euro zone officials, there may be opposition from the IMF, which wants to implement a permanent solution to the debt problems of Greece.