If you’ve just begun your forex training, the curious case of the Japanese yen’s rapid appreciation in recent months even as the country’s recession deepens is a study in the incongruities of currencies. The Bank of Japan’s chief economist has called the economic decline the worst in the past 50 years of the country’s history. For the year starting April 1, 2009, the economy is expected to shrink two percent annually, the biggest drop since 1945. Compounding the bad news is the high unemployment rate. In December 2008, unemployment rose to 4.4% from 3.9% the month before, the steepest increase in 41 years as companies such as Nissan, Panasonic, and Hitachi all announced job cuts. Yet in the last year, the yen’s ascent has been practically unstoppable. The currency has rallied against 177 other currencies and has driven the USD into territory not seen for several years. The yen’s rally has been, at least in part, due to the so-called “flight to quality” effect that happens when uncertainty in the forex market causes investors to seek out less risky assets such as the yen. The question that remains now for investors is, “Will the yen continue to appreciate given Japan’s weak fundamentals?” You can get in on the speculation action by placing trades through forex trading systems such as 24FX.com.

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