Economic weakness has driven the US currency down across the board, and it was no exception in this currency pair.
Concern about the size of the US’ debt burden, together with diminishing expectations of an early exit from quantitative easing in the US, have conspired to drag the dollar down. Risk appetite has also returned in strength, as US earnings continue to come in above expectations, further diminishing demand for the US currency. Investors were reminded about the problems facing the US government (as if they needed reminding) when Standard & Poor’s gave a negative outlook for the debt of mortgage firms Fannie Mae and Freddie Mac, following hard on the heels of its Monday downgrade of the debt outlook for the US as a whole. However, Mizuho bank cautioned that there are few reasons to buy the yen, given the likelihood of a drop in Japanese GDP for April and May and the distinct possibility of a trade deficit for the Japanese economy as the country’s massive reconstruction effort gets under way.