Last week the USD/JPY was one of the pairs that shook the currency world, this week though, the price action couldn’t shake a bowl of lime Jell-o. For the week thus far, the total range for this pair has been a mere 60 or so pips, hovering just above and below the 81.00 mark.
This is understandable though as I imagine many fingers, or more accurately many traders funds, were burned in the extreme price action that took place last week. This week it seems traders are not finding much of a desire to seek the traditional means of safe-haven in the yen as last week, that haven was anything but safe. There are still two very strong opposing forces keeping traders at bay.
The first, no one wants be overloaded on the long yen side as not just the Bank of Japan, but major central banks around the world have made it clear that they will monitor this situation and step in again if necessary to weaken the yen.
On the other side of that argument, if the situation in Japan turns for the worse, or if escalating tensions in the Middle East cause traders to have limited options on safe haven plays, the yen could strengthen significantly in a short time, Central Bank intervention or not. On either side, from a speculative play and unless traders are using limited risk contracts, the potential reward looks pretty small compared to the potential risk involved.(DANCOOK/Forbes)