The yen began to slip around September 19th 2017, as the US dollar rose to reach a two month high. These financial developments did not happen in a vacuum but were clearly motivated by the international political climate, particularly with relation to North Korea.
The recent fall of the yen is not as drastic as it may sound: the yen had in fact been rising earlier in the month. This is because the yen usually rises during actual or perceived international crises. As Japan has long been the largest national creditor in the world, its currency is seen to be a ‘safe haven’ in difficult times. An analogous phenomenon can be detected with the Swiss franc. Swiss currency is also seen to be a very safe haven during times of political upheaval and so, like the yen, the Swiss franc will get stronger and stronger as international turmoil increases. Commentators have attributed the rise and subsequent fall of the Swiss franc and the yen to the increase and subsequent easing of tensions regarding North Korea. The fall of the yen was swift and decisive: as we entered the final half of September, it had reached a 21 month low against the euro as well as falling significantly against the dollar.
Historically, the yen has been impacted much more by international upheavals and periods of instability than by events occurring within Japan. This has remained the case this September when the seemingly imminent decision from the Japanese Prime Minister to call a snap election in Japan barely ruffled the value of the yen.
On September 19th 2017, the dollar reached its highest level since July last year. The euro echoed this rise: on September 19th it was valued by traders at 134.16 yen. Meanwhile, the sterling, which had been sliding as traders lost confidence in it due to the Brexit decision and its aftermath (which are already impacting negatively on British trade relations), steadied very slightly. Nevertheless, as sterling had dipped by almost 1% in recent months, the fact that it has steadied does not mean that it is now as reliable as it was prior to the Brexit referendum. Nor is it likely to remain in this steady position for as long as British relations with Europe remain so chaotic.
On the very day that the dollar began to ascend, and the yen to descend, once more, the Trump Administration put the dollar into doubt again with Trump’s aggressive speech against North Korea at the UN. This is likely to destabilise the dollar once more and to cause traders to turn to the yen as a more reliable option. As a result, the dollar is likely to fall once more, and if it does spike again in the future, it is likely to spike much less dramatically. The Trump administration has become notorious for precipitating significant instability in the dollar, and this instability has had something of a cumulative effect.
Understanding the impact that political events can have on the relative trading values of different currencies is essential for traders who wish to succeed. Keeping your finger on the pulse of political events will enable traders to anticipate how trading values will dip or spike in response to international events. Using a good quality trading platform or trading software, such as that provided by CMC markets, will make incorporating knowledge about trading values into your trading decisions much more simple and efficient. With binary options trading, traders can ensure that no matter how complex political events are at any given time, they can boil every trade down to a simple question of two options. In addition, good quality trading software will indicate which decision is the best one to take at any given time.
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