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Yen weakening trend has finally resumed - BTMU

FXStreet (Bali) - FX Strategists at The Bank of Tokyo-Mitsubishi UFJ notes that the underlying Yen bear trend has resumed.

Key Quotes

"USDJPY has reached the 107.0-level for the first time since September 2008. Yield spread widening in terms of two-year bonds between the US and Japan is the main driver of USDJPY’s recent rise. Also Japan importers’ yen selling tends to make USDJPY rise faster than before since Japan’s trade balance turned into deficit. USDJPY will attempt to climb higher if the FOMC makes investors expect that the Fed will increase rates sooner than currently expected."

"An uplift to FOMC participants’ Fed funds projections and/or a softening of their forward guidance could prompt an adjustment higher in short-term US yields. But on the other hand the recent speed of yield increases in US treasury bonds makes emerging currencies and equities softer. We should be cautious whether such higher yield makes investors cut their huge yen short position through unstable emerging markets."

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