The Japanese Yen Climbs On Safe Haven Trading

FXEmpire   |  March 4 2013 1:56 EST

By FXEmpire.com

The big market news is the strengthening of the Japanese yen, trading this morning at 93.35 gaining 19 pips against the US dollar and against the euro the JPY has added 29pips. Euro traders are headed to the JPY as safe haven moves are increasing. With the US dollar strong, traders are taking advantage of the weak yen to find safety. The yen strengthened against all of its 16 major peers as signs Europes debt crisis is deepening.

After moving out of the limelight with the Japanese monetary stimulus and Bank of Japan keeping traders distracted and the US fiscal cliff, debt ceiling and sequestered budget cuts filling the headlines, the trouble in the eurozone was pushed to the back burner. The bailout of Cyprus was a small blip on an inside page. Investors assumed such a tiny economy would not cause much of a problem for the EU and the IMF with the EMS in place it was thought to be a breeze. Several months ago when Cyprus requested a bailout, there was little market reaction. Well now it seems that the bailout of Cyprus is not as easy as it seems and has shaken the foundations of the euro and brought the ongoing eurozone financial crisis back to the front page.

Cyprus’s finance minister, Michalis Sarris, set out his strategy in negotiating a 17 billion euro ($22.1 billion) bailout from the euro zone and the International Monetary Fund on Sunday, 24 hours before restarting stalled talks with his euro-zone counterparts.

Cyprus will meet its would-be creditors halfway on privatizations, shrinking its financial-services sector and auditing its anti-money-laundering framework, he said, but won’t tolerate talk of a depositor bail-in that has sparked depositor flight in recent weeks.

Rumors that Cyprus could leave the EU seem to be making headlines again, all reminiscent of the Greek bailout, well after all they are cousins and neighbors, who would expect politics to be much different.

Not far from the Cypriot borders we find Italy, in the midst of political turmoil and governments shake up. The Italian election opened the door for a return of Silvio Berlusconi and leaving no clear leader or coalition government. The euro continues to tumble trading at 1.3014, down 0.3 percent on the day after hitting a low of $1.2965. Poor Eurozone PMI numbers and other data pushed the Eurozone down against dollar. Italian political instability and pressure of Sequesters was also seen on the euro. European leaders demanded that euro members press on with budget cuts to end the debt crisis as Italy edged closer to a new election after an anti-austerity vote last week resulted in political deadlock. The euro is expected to fall further amid Sequester pressure and Unemployment data of Spain today can weaken the euro further.

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Originally posted here