The Japanese yen saw an extremely volatile trading session over the past week. The yen saw several ups and downs against its major rivals, yet it ended the week with sharp uptrends, including a 120 pips gain vs. the U.S. dollar, a 250 pips gain vs. the euro and a 270 pips gain against the British pound.
The yen's trading was impacted by two significant events. The first one was the Standard & Poor's unexpected decision to downgrade Japan's credit ratings from AA- to AA. The credit rating was lowered due to persistent deflation and as political gridlock undermined efforts to reduce an $11 trillion debt burden. The yen instantly slid against the major currencies following the announcement.
However by Friday, protests in Egypt began escalating, provoking concerns that a political turmoil might be impending. This has boosted risk-aversion in the market, spurring demand for safe-haven currencies, such as the Japanese yen.
Looking ahead to this week, several interesting economic releases are expected from the Japanese economy, yet at least for the near future, the political developments in the Middle East might have a larger impact on yen trading. Traders should take under consideration that if the unrest in the region will grow, the yen might strengthen further.