Forex trading online: The yen and the global economy

In forex trading online, both the local economy (national economy) of the currency and that of other nations has an impact on the trade value of each currency. This can be seen in recent with the Japanese yen. According to Reuters, “The yen was weak across the board after a report in business daily Nikkei, which said Japanese Prime Minister Shinzo Abe is considering a corporate tax cut as a way to offset the potential economic drag of a planned hike in sales tax.” 

“The tax cut report boosted Japanese shares and provided further support for dollar/yen, which has had a strong correlation with Japanese equities in recent months,” Reuters. When involved with forex trading online, it is just important to keep track of what might happen (the rumors) as much as it is to look at what had already transpired and what is occurring at the market – in regards to the economy and the movement in currency value. Also, due to forex trading online and an increasingly connected global economy, there is even more reaction to economic news from across the Pacific. And this market reaction can be quick since forex trading online takes place at any time of the day and can be done nearly anywhere in the world.

In the United States economy, Reuters reported that “July's gain was the biggest since December, and suggests the economy could be regaining steam after tax hikes and federal budget cuts dragged on growth in the first half of the year.” With mixed government policy news coming out of Japan and promising economic news in the U.S., the U.S. dollar has strengthened its position against the yen. After all, it was “only last week the dollar was at seven week low against the yen,” stated Reuters.

Recent positive economic news coming out of Europe is also putting a drag on the yen. Geoffrey Yu, UBS currency strategist out of London, reported that "the euro is reacting to stronger than expected data, but we are not expecting it to go much higher until the central bank is prepared to change its policy stance." Currency traders involved in forex trading online will be looking at the current effect on the currency values from these most recent announcements and also at the long term implications.