The Yen is Japan’s national currency. Its importance in the world foreign exchange (Forex) markets reflect the size and dynamism of the Japanese economy. Japanese Gross Domestic Product (GDP), the measure of an industrial nation’s economic strength, is third worldwide, after the US and China.
Since the demise of the Bretton Woods agreement in 1973, the world’s currencies are floating, with the US Dollar (USD) succeeding so far in maintaining its position as primary reserve currency. Since the global financial crisis of 2008 that position is under increasing pressure, as the US stand accused by many of abusing their seignorage position, thus holding their creditors hostage to their ability to reduce the national debt through devaluation, and hence the downgrading of US Treasury bonds (the IOU’s held by the creditor countries, of which Japan, China, India and Saudi Arabia are leaders).
Among the world currencies the Yen, and, increasingly the Chinese Renminbi, dominate the Asian Forex markets.
The exchange rate between the US Dollar and the leading Asian currencies, Yen and Renminbi, are of crucial importance for the trade balance of those countries with America. There is a long history, since the onset of the “long downturn” in the 70’s, of a tug-of-war between the US and leading exporting nations, Germany, Japan and now China, for which the US is the premium market.
World-class centres for Forex are located in Tokyo, Hong-Kong, Frankfurt, Chicago, New-York, Sydney and in the City of London (more exactly its extension of Canary Wharf). There the main Forex dealing institutions trade in Yen and hope soon to create Renminbi desks (so far restricted to Hong-Kong).
- U.S. dollar lower after GDP data (business.financialpost.com)
- The Rise of the Renminbi as International Currency: Historical Precedents (economistsview.typepad.com)
- Yen sags pending monetary announcement (dawn.com)
- Japan Mar FX Reserves Fall on Lower Treasuries, Gold Prices (forexlive.com)
- Japanese Trade and the Yen (r-bloggers.com)