Forex Trading: Why does the Yen Strengthen on Risk Aversion
http://www.informedtrades.com/ My answer to a readers question on why the yen has strengthened as a result of the sub prime crisis. The yen has a very low interest rate so when times are good and people are looking to take some risks they will borrow yen and buy other assets that they expect to get a higher yield with such as other currencies that earn a higher interest rates, stocks, etc.When things go bad however such as what happened in the subprime market traders unwind those positions and buy back the yen that they sold causing the yen to rally. They unwind their positions either because they become more risk averse or because they are forced to because of losses and the resulting margin calls.
currency, daytrade, foreignexchange, Forex, forexmarket, forextrading, howto, JPY, Yen
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