English: Graph showing Nikkei 225 from January, 1970 (End of Month). USD Version. 日本語: 1970年1月からの日経平均株価のグラフ（月末）。ドルベース。 (Photo credit: Wikipedia)

The Effect Of Nikkei On The US Stock Markets

Japan's Nikkei stock market has remained volatile in the most recent quarters, and such activity can only be expected to impact US stock markets. The questions that remain in market watchers' minds entail what kind of an impact and to what degree. According to a recent Reuters report, Nikkei has seen some recent positive gains, but how long those gains will hold is still anyone's guess.

Nikkei recently recovered from a 7.3% drop and closed with a 2.7% overall gain. This trend is a small sample of the rest of the Asian markets' volatility compared to US stock markets. Despite these fluctuations, the US dollar still remains stronger compared to many currencies in this part of the world. A stronger US dollar helps to secure it against noticeable negative effects and declines in value, but more severe drops in the Nikkei can eventually place more downward pressure on the US dollar. For this reason, US investors with interest in Asian markets still keep a close watch on the Nikkei.

The Nikkei market's relatively volatile performance is tied closely to that of major Japanese companies, such as Motorola and Toyota. Slumping market performance of these companies and others can pull down the overall percentage points of the Nikkei, which can in turn affect the portfolios of US investors with shares in these Japanese businesses. In addition to stock value, significant fluctuations in the Nikkei can have an effect on the currency exchange rates between the Japanese yen and the US dollar.

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