The euro is suffering the biggest monthly drop in its history against the yen and the dollar

Brussels - October 31, 2008 - The yen and the dollar have closed the biggest monthly rise in history against the euro. The signs are increasingly obvious that the world economy could fall into recession have increased risk aversion among investors, prompting the market value of the Japanese currency, and has led to seek refuge in the greenback. The recovery of the dollar to oil pressure, which is on track to sign its biggest monthly decline since 1983.

The yen has resumed today the upward path it had abandoned the last sessions after the Bank of Japan (BOJ) lowered interest rates 20 basis points to stand at 0.30%. The market expected a cut of 25 basis points.

"This movement, which initially was penalized by the market, over the medium term, we believe it will be beneficial to the weak Japanese economy, helping, to the extent that risk aversion diminished by the gradual recovery and stabilization of major financial markets, the reopening of the operations of carry trade with the consequent weakening of the yen, "commented analysts X-Trade Brokers.

The Japanese currency is moving in front of the main crossings. Is about to 125.31 euros (EURJPY) and to 98.38 U.S. dollars (USDJPY). The euro (EURUSD), in turn, loses some of the ground gained in recent days against the dollar, dropping to the level of 1.26.

The yen has gained 17% against the euro in October, the biggest monthly gain since the creation of the European currency in 1999. The dollar has appreciated more than 10% compared to the single currency in the month. In turn, the greenback has lost almost 8% against the Japanese currency in October, the largest drop since 1998.

Sharp rise in the dollar

The U.S. currency has suffered a sharp revaluation against most major currencies except the yen in recent weeks. Experts from X-Trade Brokers suggest the reasons for this recovery:

· The bad behavior of emerging markets, which have been hardest hit by the financial crisis of what we believed the forecasts, making the major investment funds denominated in dollars, to recover much of their investments, which also has instead the need for liquidity of the same, pushing the dollar sharply upward.

· The worsening of the forecasts for the deterioration of the economies in the euro area, causing speculation about major rate downs by the ECB.

· The worsening of the forecasts for the deterioration of the economies in the euro area, causing speculation about major rate downs by the ECB.

· The potential revaluation of the greenback, given the changes that low mark reached in mid-July.

· The bad behavior of the markets for raw materials, which ceases to have much weight in the portfolios of investment funds in favor of the dollar.

Source: El Economista