Japanese Yen Rises on Improving Economic Activity

The Japanese yen rose against other major currencies on Tuesday, as new data suggests Japan's economic activity is recovering. At the moment, the U.S. dollar lost 0.06% of its value to trade around ¥80.21. At the same time, the euro's losses were much larger as the European currency fell 0.23% to stand around ¥115.07. The yen found strength in Japan's improving economic activity. According to government data, Japan's All Industry Activity Index rose 1.5% in April, compared to a month earlier, from a 6.4% fall in March. Analysts did, however, expect it to rise by 1.8%. On an annual basis, the index stood at -4.1% in April, a slight improvement from -4.5 in March. The Japanese economy is still suffering from the effects of natural disasters that have caused power shortages and supply disruptions. The April data will probably be interpreted as a sign that the Japanese economy is recovering, though at a slow pace. Even though Japan's economic performance is far from stunning, it is still enough to push the Japanese currency higher against the euro and the dollar, as the Eurozone is still fighting to resolve the Greek debt crisis and the U.S. government is trying to persuade Republicans, who control the U.S. Congress, to raise the U.S. debt ceiling. Other major Asian-Pacific currencies had a more difficult trading session on Tuesday. The Australian dollar suffered losses against the greenback, falling 0.18% to $1.056, as the Australian central bank made it clear there is no urgency to raise interest rates in a meeting held today. Traders who believe the Japanese economy will continue to recover, while the Eurozone and the U.S. will be hit hard by debt crisis, providing a lot of tailwind for the Japanese currency, will be interested in the CurrencyShares Japanese Yen Trust ETF FXY and the JPY/USD Exchange Rate ETN JYN. Other traders will interpret recent data as another sign that the Japanese economy continues to underperform. At the moment, the failure of Japan's economy to meet analysts' expectations is not reflecting on the strength of its currency as other major developing nations have even bigger problems, mainly concerning debt. As the U.S. and the Eurozone start to resolve their debt problems, the value of the yen might start to fall rapidly. Traders who believe in this scenario will be more interested in the ProShares UltraShort Yen ETF YCS.