The yen dropped on Monday to a new seven-month low versus the dollar because of concerns that the Bank of Japan will create more monetary easing, while a possible agreement preventing the fiscal cliff in America has helped to boost the euro and other more risky currencies.
The euro spike also was due to prospects that finance ministers from the common currency zone would agree on a program of two years for funding the bailout of Greece with the International Monetary Fund.
The yen held steady with the dollar at 81.28 following an increase up to as high as 81.59, which was the highest it had been since the second half of April. Investors helped lower the Japanese currency after announcements were made of December 16 elections and the Liberal Democratic Party announced that the BOJ should print an unlimited supply of yen and then set the prices at zero or below.
Nevertheless, investors have become worried about the yen going even lower prior to the Bank of Japan’s Tuesday policy announcement, where most believe the BOJ will opt not to have any new monetary easing at the present time.
Analysts have said that questions about the monetary easing and possible changes in policy from the BOJ have weighed the Japanese currency down. Many believe, at least for this meeting, the Bank will not make major changes to policy.
The euro was higher on Monday morning to $1.277 or up about 0.2% from its 45-day low of $1.266 during last week’s trading. Nevertheless, the currency is still far below the 200-day moving average of $1.280.
