The Japanese yen dropped against the U.S. dollar the largest amount in one month on Tuesday, as markets reacted to the decision by Fitch Ratings to cut the country's credit rating.
Bloomberg reports that the credit ratings service decided to downgrade Japan upon deciding it was taking insufficient action to alleviate its growing debt problems.
Prime Minister Yoshihiko Noda, according to The New York Times, has relied largely upon an plan that would increase consumption taxes to 15 percent, but Fitch argues that the country will still see its debt-to-GDP ratio hit 240 percent by the end of the year.
The country's long-term international currency rating and its domestic currency rating were both lowered to A+, from AA and AA-, respectively. That rating puts Japan just ahead of Greece in terms of risk of investment.
In response, the yen fell against all 16 of its major rival currencies. At 11:22 a.m., the Yen fell 0.81 percent against the dollar.
"Everyone has been betting on a weaker yen for some time now and we’re finally starting to see signs of that," Blake Jespersen, managing director of foreign exchange at Bank of Montreal, told Bloomberg.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
