Japanese Yen Strengthens As Risk Appetite Wanes

The Japanese Yen may continue to strengthen against its major counterparts over the following week as market participants curb their appetite for higher risk/reward investments, and the low-yielding currency should benefit from safe-haven flows as investors weigh the outlook for a global recovery. The World Bank lowered its growth forecast from March and projects the world economy to contract at an annual pace of 2.9% this year amid an initial forecast for a 1.7% drop in global growth, and the dour outlook held by the bank suggests rising energy costs paired with deteriorating trade conditions are likely to hamper the prospects for future growth. At the same time, the Organization for Economic Cooperation and Development predicts the global recovery to be ‘slow and fragile,’ with the economic downturn expected to have a lasting impact on the world economy as the group anticipates a permanent increase in the cost of capital. The comments foreshadow a weakening outlook for future growth as businesses face rising input costs paired with fading demands from home and abroad, and fears of a protracted recession could lead the Yen higher as investors turn risk adverse.