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Reason for the weaker Yen (1) Higher crude

The oil is traded in Japan using US dollar, and then, the higher crude price brought about the weaker Yen. In proportion as the crude price is going higher, the payable amount of US dollar increases even if the needs of oil remains unchanged.

As the importers need to settle in US dollar, the forex banks have to buy US dollar to cover their position. This action might follow the purchase of US dollar and sales of Japanese Yen.

Actually, it is rare that the purchase of US dollar affects directly to the forex market due to the strategic petroleum reserves, but it would give some effects gradually to the forex market.

Reason for the weaker Yen(2) Capital outflows

Due to the global economy, the Japanese companies would expand their business overseas to make an acquisition or export their plants abroad, especially when the domestic economy falls in depression. These actions need much forex currencies and those cause further Yen depreciation.

As the companies need US dollar to pay, the forex banks have to buy US dollar to cover their position. This action might follow the huge purchase of US dollar and sales of Japanese Yen and it leads weaker Yen.

The overseas investment by some Financial institutions give the forex market a big impact. The capital flows amount so much that the forex market moves drastically.

Reason for the weaker Yen(3) Travel abroad

As one of seasonal factors, the trips abroad is probable to make the Yen value lower. Most Japanese go to a trip during the golden week, summer vacation and the beginning of the year. On that season, the demand for the forex currencies increases for a pocket money, travelers check and credit cards.

 

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