Dollar Slipping Against Yen

Lately, the U.S. dollar and Japanese yen exchange rate hovered around 80-82 yen per every dollar exchanged. It wasn't getting any better, but it wasn't getting any worse.

Until now.

This past week, the dollar started slipping with forecasters fearing a repeat of March.

According to the Wall Street Journal:

NEW YORK (Dow Jones)--An onslaught of forced buying linked to options helped fuel the yen's violent rally in March. Now, some in the market fear a rerun of that scenario. The question is how abrupt the currency's moves may be this time.

"It's a big debate," says David Gary, New York-based head of foreign-exchange derivatives at Deutsche Bank AG. "There are definitely multiple opinions."

On Wednesday, one dollar bought Y79.79, just below Y80, a key level for Japanese authorities, who worry a strong yen will make it harder for quake-hit Japanese exporters to sell their goods abroad.

Mr. Gary says he expected the dollar/yen exchange rate to "start accelerating to the downside on a break of 80, and more so below 78.50." A gauge of jitters in the currency markets on Wednesday suggests some traders are bracing for a sudden slide in dollar/yen.

To read the full article, go here.

Today's exchange rate between the dollar and yen (source: Universal Currency Converter):

1.00 USD = 80.3100 JPY

Besides the problems this causes Japanese exporters that the Wall Street Journal article stated, it also makes it harder for Americans to afford traveling to Japan. Many Japan-based tourism companies tie their prices to the exchange rate as does the JR Rail Passes. This makes them more expensive.

The dollar's slippage is also causing concern to China, who owns much of the U.S. debt.

According to this article from the U.K. Daily Mail:

China, which holds $1.2 trillion of the U.S. deficit, has cracked the whip to make sure Washington can pay up amid fears America is already defaulting.

A Chinese ratings house yesterday accused the United States of defaulting, just one day after Beijing urged Washington to put its fiscal house in order.

'In our opinion, the United States has already been defaulting,' Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.

Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies - eroding the wealth of creditors including China, Guan said, according to the AFP.

It appears that the Chinese aren't happy with the Obama Administration's economic policies. They are not impressed with "hope and change." Adding $14+ trillion to the national debt since 2009 isn't exactly getting one's fiscal house in order!

This comes at a bad time as the travel season is beginning.