S&P downgraded or rather warned Japanese government of an impending downgrade. Yen initially lost 30 pips or so, but screamed back against the dollar in seconds. Dollar has strengthened against every currency over the last 2 months except yen. It has confounded dollar bulls to madness.

But as we analysed a few weeks back, there are reasons why yen continues to rise and that is the underlying strength in the Japanese economy.

Refer our previous post here Japan economy revival

Japanese exports posted their first on-year rise in 15 months in December, led by strong demand from Asia, the Ministry of Finance said Wednesday, an encouraging sign for an economy reliant on overseas orders to fuel growth amid persistent weakness in domestic demand.

Exports rose 12.1% to ¥5.413 trillion ($60 billion), their first on-year gain since a streak of falls that began in October 2008 as global trade slowed amid the financial crisis and included a record 49.4% plunge in February 2009. The rise was bigger than a 8.6% increase expected on average by economists surveyed by Dow Jones Newswires. The return to growth in exports helped Japan’s December merchandise trade balance expand to a ¥545.3 billion surplus from a ¥322.2 billion deficit in the same month in the previous year. Economists surveyed by Dow Jones Newswires and the Nikkei on average expected a ¥588.4 billion surplus.

Exports to China rose 42.8% to ¥1.071 trillion, and shipments to Asia expanded 31.2% to ¥3.031 trillion.

Meanwhile, overall imports were down 5.5% to ¥4.868 trillion, falling for the 14th straight month.

Source: Washington Post

More proof that Japan is recovering courtesy its trade with China and India and there is very little that S&P downgrades can do to YEN. YEN is headed to 80 this year.

Fresbee
Investing Contrarian