The Honda Motor Company today announced that it had seen an unexpected rise in profits over the last three months. But the company is still predicting a fall in profits for the whole year.

The net profit for the group between April and June was £848 million (179.6bn yen), and was up 8.1% compared to the same stage last year.

These figures came in spite of a revenue fall of 2.2% due to the strengthening Japanese currency. Honda still maintain that its forecast for an 18% fall in net profit for the whole year is still practical, despite the better than expected Q2 figures.

The dollar continued to progress against the yen in Monday afternoon’s trading in Tokyo; this was mainly due to Japanese importers buying the greenback following its earlier decline.

Japanese investors purchase the dollar when the currency falls, as they try to finance purchases of basic raw materials and oil at lower prices.

The dollars short-term outlook remains unclear after the latest US jobs data revealed a sharp increase in unemployment in May.

Interest rate decisions of an expected rate cut from the US Federal Reserve have made the Yen weaker yesterday.Investors are reacting to rates.

Carry trades are still as risky as ever. The US dollar remains pretty much unchanged against the Euro.

It seem the US Dollar is holding up not only in Europe but also against the Yen. This is pleasing news after the recent results from retail sales figures in the last few weeks.

There is still much anticipation on how the market will be in the next few months especially with the prospect of interest rate cuts by the end of this month or perhaps even earlier.

Although the present market is still feeling the effects of the credit tightening which has put currencies such as the dollar under more pressure the Yen has reaped the benefits.

As a funding currency the Yen in carry trades is picking up from the continued high risk aversion status. The Yen continues to hold up against other currencies such as the euro, dollar and Aussie which are known to be high yielding.

Debts amounting to over 105 billion will have the credit rating lowered which comes after the subprime financial mortgage crisis.

The Yen influenced trading as most major players fell against it last week.
The Global market downturn affected the investor’s sentiment towards risk and around the globe most fell against the Yen carry trade.

Most affected was New Zealand which shed 7.5% against the Yen, so risk reduction had to come into play at some stage.

So the Yen jumped as many market players reversed their posistions using other currency of low-yield value such as Japanese to buy higher yielding currency like Australian and New Zealand dollars in the carry trade.