Dollar Loses its 7-Month High and high volatility seen.

According to the news update I read today at FINEXO the dollar lost ground against the yen, thus retreating from its 7-month high achieved due to the fall of oil prices to a 3-month low. Many of the traders preferred to sell on the profits of the previous day, in which the oil's drop beneath $120 a barrel supported stock gains and investors are willing to take more risks after yesterday's new found support in the dollar.

When investors are willing to take more risks, this usually means the renewed investment in low yielding currencies like the yen in order to profit from higher interest rates somewhere else, also known as carry trading. Despite this short-lived profit-taking, analysts believe that the dollar will continue its rise.
My growing concern is about the Japanese economy, which might increase dollar buying. The yen is under pressure due to a series of data suggesting that Japan's postwar economic growth might be coming to an end. This supports views that the Bank of Japan would probably leave interest rates unchanged at 0.5% in the near future.
Market players are closely monitoring the yen to see if it can break above the 109.95 yen resistance, the highest in almost 6 years. The dollar eventually stabilized at 109.40 after a drop of 0.4 percent. The previous day's 7-month peak was of 109.89.

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