Deteriorating oil prices should weaken Yen

The Japanese Yen has gained a lot of ground in the past few months. The Yen became stronger when the US dollar lost ground to other currencies, and got even stronger when the dollar strengthened against these currencies.

Currently, 1 US dollar is worth only 92.71 Yen. This valuation is at a very low point in many years. When looking at the important crosses, such as GBP/JPY or EUR/JPY, the gains that the Japanese Yen made are incredible.

Now, when the American economy has seriously deteriorated, oil prices continued to collapse. This Friday’s Non Farm Payrolls declined in a whopping 533K. Unemployment rate has risen as well. Americans can’t consume as much as earlier, and this hurt oil prices.  

Friday’s fall in oil prces sent it to about $40 per barrell. Now, there’s a strong correlation between the price of oil and the stock market. This could be seen in the sudden rise in stock prices. Yes, despite terrible economic news, the fall in oil prices, sent Wall Street up.

There is yet another correlation: When American stock prices go up – the Yen goes down. So, when the late rally on Friday began, the Yen lost ground.

I see this trend continuing: the American interest rates have almost reached rock bottom – or Japanese interest rates if you wish. Add the very low oil prices and the conclusion is easy:

The Yen has reached it’s peak. It will only go down from here.