The Yen can benefit from a quirk in the markets. Because it has such low rates, traders and investors typically take out loans in Japan and exchange the proceeds for higher-yielding bonds from nations such as Australia, New Zealand, and Brazil. In times of global economic turmoil, like now, traders reverse these bets. As a result, money flows back into Japan as the loans are paid off, triggering a rise in the Yen.
An element supporting the Yen is that Japan records huge trade surpluses with the U.S. – more than US$28 billion in 2009. The country’s deflationary domestic economy is weak, but the Japanese export machine beats anything a weakened America or Europe has to offer.
The Yen is strong because the U.S. and Europe are in the tank.