If the dollar rises in price to European currencies, it decreases in relation to the Japanese yen. Moreover, this weakness cannot be called a temporary phenomenon.
According to the head of the North American currency strategy department in TD Securities Mark McCormick, a mark of 95 yen per dollar may well become a reality very soon.
As McCormick noted during an interview with Bloomberg Television, the USD/JPY pair received support last year, as Japanese investments went to corporate papers and US stocks. Now, the Japanese will return investments home with the growth of the VIX index and the negative dynamics of American assets on the Sharpe index. In addition, shares of Japan are also considered among the most popular in the world, which will attract capital in the Land of the Rising Sun.
If you pay attention to the weekly data on the movement of capital in Japan, you can see the nascent revival of foreign interest in stocks. At the same time, the demand for foreign paper falls.
"So this story will lead to an increase in the yen, and the USD/JPY pair will move down, for capital is returning to Japan," concluded McCormick.
As for the other popular pair, EUR/USD, here the dollar manages to stay afloat due to problems in European countries. Tensions in the UK persist. Theresa May retained her post as prime minister following a vote of a no-confidence vote and she is preparing to submit a backup plan for leaving the EU on Monday, January 21. More and more alarming signals are coming from the Euroblock economy. Last year, Germany's GDP rose at the lowest rate in 5 years and almost slipped into a technical recession.
In this direction, the dollar will in the near future continue its positive movement against the background of the influence of opposing factors. However, the risks of the US currency remain. If the US government does not break the deadlock in the foreseeable future, the dollar will go off the target.
