The USD/JPY rose to its highest in almost seven years on Thursday, Nov. 13.
The currency pair climbed to 115.817, according to data provided by FXStreet. As a result, the USD/JPY neared the seven-year high reached on Tuesday, Nov. 11, Reuters reported. The currency pair depreciated during the day, reaching a session low of 115.3, after the U.S. Department of Labor released a report showing jobless claims rose in the week ending Nov. 8.
The government agency indicated that during the period, these initial applications for jobless benefits rose 12,000 to 290,000. The four-week moving average also ticked higher, increasing to 285,000 from 279,000.
In addition to the rise in U.S. jobless claims, another factor that coincided with the USD/JPY’s upward movement was speculation that Shinzo Abe, prime minister of Japan, could soon hold an impromptu election, according to Reuters. It seems the Asian nation’s head of state has decided to hold one of these events, a senior official in the premier’s party told members of the media.
An election of this nature could enable Abe to successfully postpone an increase in the national sales tax, The Financial Times reported. The country implemented a similar tax hike in April, and the costs were higher than expected. Currently, the prime minister’s Liberal Democratic party holds 85 seats in Japan’s lower house of parliament.
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Analysts have predicted that if Abe can return with a larger mandate, he can not only postpone the planned increase in the national sales tax, but also implement more government policies to help push the price level higher, according to Reuters.
Another major factor that may have contributed to the USD/JPY’s price fluctuations on Nov. 13 was speculation surrounding the policy harnessed by central banks in both Japan and the U.S. Investors participating in forex trading frequently look to such activity when predicting where currency pairs – such as the USD/JPY – will move further down the line.
Market participants around the world have been looking to the Federal Reserve’s statements to get a better sense of when the financial institution will bolster its rate. Recently, New York Federal Reserve President William Dudley spoke to the organization’s use of monetary stimulus, saying that reducing it too soon could undermine the current economic recovery, according to Reuters.
The central bank recently cut off its latest round of bond purchases, after pushing its balance sheet to more than $4 trillion in the several years since the financial crisis. Now, market participants have turned their eyes to the timeline the Fed will use to push its benchmark interest rates higher, after keeping them close to zero for the last several years.
Investors taking part in forex trading might be wise to scrutinize the price movements of key currency pairs like the USD/JPY, as well as monitor the explanations analysts are giving for these price fluctuations.
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