USD – Yen Exchange Rate Forecast

While investing and trading for the USD and YEN exchange rate hit a high at 91.07 on March 12, 2010, it appears that numbers have leveled off and are now hesitating to move forward.  Forecasters explain that this exchange rate has been somewhat stuck when looking at long-term movement, dating back to April of last year.  The good news is that the numbers for the first two weeks of March hit around 88.12 and 89.47, which is higher than numbers reached in December of 2009.

While hitting 91.07 was certainly better than most experts thought, forecasters also believe that numbers will reach upwards of 91.65.  In fact, some forecasters are going as far as saying that gains will reach 93.74, perhaps yet in March of this year.  If that happens, these experts believe it will be the highest number for the entire year when looking at the USD to YEN exchange rate.

Even though exchange rates have taken a short-term climb, even greater than what most forecasters believed possible, they still say that when looking at the USD to YEN exchange rate forecast long-term, this currency pair is very vulnerable to seeing a downward slide but only if it continues to stay within the falling channel.  Therefore, the USD to YEN exchange rate is one that will need to be watched for some time closely.

People want to know what the currency pair started climbing.  The reason is that forecasts announced for the Federal monetary policy was behind the market movement when the upward turn happened in December of 2009.  Then as Japanese investors preferred US versus domestic government bonds, the USD to YEN exchange rate kept increasing.

When looking at the yield spread between these two countries, it is nice to see numbers hit close to 92%, especially when looking back at this pair over the past decade.  Currently, prices are around 2.6% off from the PPP-implied exchange rate, which means there is potential for numbers to move into a territory that is overvalued.  Interestingly, while the Fed has started to move away from some of the unconventional easing programs, the Bank of Japan is moving toward them.

To forecasters, this is a clear indication that rate hikes will be seen sometime toward the end of this year.  With several different opinions and too many things in the balance, most experts are trying to stay neutral specific to the USD to YED rate forecast.  Although short-term this pair of currencies looks good, long-term many questions remain.  Therefore, many experts are taking more of a “wait and see” approach, hoping that the increase seen over the past several months will continue.

While many markets are definitely struggling and not seeing any advancement at all, at least the USD to YEN exchange rate does show some optimism.  Of course, for investors and traders, they will be watching the numbers of this pair closely and staying on top of announcements made by both country’s governments, as well as expert forecasters before making any serious decisions.