As risk aversion heads higher, so does the value of the Yen. Yesterday the JPY strengthened across the board and dropped below a significant support line. At one point in yesterday's trading the USD/JPY fell to a low of 88.86 before ending the day at 89.27. The large price swing may be attributed to low levels of liquidity as Japanese markets were closed yesterday for a bank holiday.
This is the fourth consecutive day for a strengthening Yen. The renewed gains sparked further speculation of Japanese government intervention in the currency markets. A strong Yen hurts Japanese exports, a major component of the Japanese economy. The government has made pledges to intervene in the open market, but we have yet to see a firm commitment to help weaken the currency.
Traders may look for the Yen to perhaps continue its bullish run. Keep an eye for the U.S. trade balance report today. This may help to send the JPY higher against the Dollar, possibly below the 89.00 level.