Yen Falls to 6-Month Low Against US Dollar as Safe Haven Demand Wanes

Iran Agreement

The Japanese yen fell to a six-month low against the US dollar after a historic deal limiting Iran’s nuclear activities was announced on Sunday following five days of talks. News of the accord lifted global stock markets and softened demand for the yen as a safe haven.

The agreement, reached in Geneva between six world powers and Iran, commits Iran to restrain its nuclear program in exchange for an easing of sanctions.

In April of 2013, the Bank of Japan announced their large scale bond-buying program aiming to stimulate the Japanese economy and prevent deflation. The program weakened the yen initially. However, the Japanese currency stabilized as concerns over military intervention in Syria and the US debt crisis caused investors to move to the yen as a safe haven.

BOJ's Kuroda Comments

On Monday Bank of Japan Governor Haruhiko Kuroda reaffirmed the central bank's commitment to accommodative monetary policy in order to reach its 2 percent inflation target.

Speaking at the Paris Europlace International Financial Forum in Tokyo, Kuroda said "We expect that inflation target to be reached sometime in late fiscal year 2014 or early fiscal year 2015."

Addressing the option of negative interest rates, he said "Negative short-term interest rates could be possible and (may have been) experimented with in some countries in the past. But that's only to some extent and for quite a short time."

Nikkei Continues Surge

While the yen softened, the Nikkei continued its rise as on Monday nearing a five year high reached in May of this year. A weaker yen aids Japanese exporters, making their products more competitive abroad.

USD/JPY Daily Chart

Looking at the daily USD/JPY chart we can see that price is trading above both the 50 and 200 day simple moving averages. RSI is in overbought territory with a reading of 73. Potential resistance lies above at the former high of 103.69.

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