The current financial market is witnessing a scenario where the Euro index is struggling, while the Yen is getting stronger. The strength of any currency in the global economy relies on a series of factors including, but not limited to, economic indicators, geopolitics, and market sentiments.
Starting with the Euro, one of the primary reasons for its recent tumble is the resurgence in COVID-19 cases across Europe. The increasing rates of infections in major economies like Germany and France have raised concerns about potential lockdowns which could hamper economic recovery. The Eurozone’s economy is also struggling with a slow recovery as reflected in its underwhelming growth figures and high unemployment rates. This scenario supplements the slipping Euro index.
As the global investors seek safer investment avenues amid these uncertainties, the Japanese Yen is perceived as a safe-haven currency. The nation’s stable economic outlook, plus its habit of running a current account surplus, makes it attractive to investors during tumultuous times. The demand for Yen also increases when investors want to mitigate risk exposure from other markets, leading to its increase in value.
It is also worth noting that the forex market operates in a cyclical manner and these trends could soon reverse based on upcoming events and changing market conditions.
