The Japanese Yen had a good outing on Wednesday as some of its major currency partners fell sharply against the appreciating Yen. The Japanese Yen has been taking a hit for past few months due to a stagnant Japanese Economy, grappling with a sluggish industrial growth. This sudden rise in Yen was a welcome reprieve after a bearish performance of the Yen and the Japanese Stock markets.

In New York, the Dollar fell by as much as 0.8 % to trade at 99.86 against the yen on Wednesday late afternoon. On the other hand, the Euro also declined sharply by 0.6 % to trade at 129.89 against the yen. This signals an uptrend for Yen as Dollar, a major currency partner, has dropped below the critical 100 Yen mark.

As one investigates this sudden rise in Yen, we find that investors seeking refuge from the political strife in Portugal and instability in Egypt considered Yen as a safe-haven in currency markets. In Egypt, the President Morsi was overthrown in a military coup in response to the several weeks of public protests against the government. The Military has now formed an interim government, as it had previously issued a 48-hour ultimatum for the government to fix the escalating political crisis.

Meanwhile, in Euro the political wrangling and discord was deepening in Portugal. The Portugal equities market had plunged reacting to the Foreign and Finance ministers quitting last week. While in Greece, the apprehensions of a new debt crisis reared its head, as concerns still remain whether Greece can meet the conditions of its next Euro bailout package. This had a deteriorating effect on the Euro as it posted a decline against the strengthening Japanese Yen.

The Dollar seems to have reined in its rise and steadied on the backdrop of mixed U.S. economic data. While the US unemployment had declined by 5000 against an expected 3000, the other economic indicators were not promising enough. According to the Institute of Supply Management, the non-manufacturing purchasing manager’s index dropped by 52.2 for June from 53.7 in May, belying the expectation of an increase to 54.0. For US, this reading is the lowest in past three years. 

Apart from this, US economy seems to have got itself into a tight spot with an unexpected increase in the trade deficit. The US trade deficit has increased to $45.0 billion in May from $40.2 billion in April due to a steep increase in imports that rose to $232.1 billion. This made traders doubt an early tapering of bond purchase by the Fed.

All of these factors seem to have contributed to this strong uptrend in Yen. Furthermore, the US markets are closed for July 4 Holiday, making traders reluctant to open any new position on dollar. However, a lot depends on the US non-farm payroll data due this Friday and the ECB interest rate decision to be announced this week, as investors will be awaiting them with bated breath.