Could Japanese Yen Depreciate Further from Election Uncertainty?
Yen continued to depreciate last week
The Japanese yen (JYN) depreciated for the fourth week in a row last week. The yen (FXY) closed at 112.64 against the US dollar (UUP), depreciating 0.13%. The Japanese economic calendar included only the manufacturing index data, which was positive but did little to help the Japanese currency. The key factors that were driving the yen last week were political uncertainty due to the snap elections in Japan and the US dollar strength.
Japanese equity markets (EWJ) remained upbeat, with the Nikkei 225 (JPXN) posting a weekly rise of 1.6% for the week ended October 6, 2017. Japanese companies’ dependence on foreign income makes a depreciating yen positive for equity markets.
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Speculators decreased bearish bets on the yen
Japanese yen (YCL) speculators increased their short positions on the yen according to the latest Commitment of Traders report released on October 6, 2017, by the CFTC (Chicago Futures Trading Commission). Total net speculative short positions increased to 84,643 contracts compared to 71,347 short contracts for the week ended September 26, 2017. There could be a further increase in short positions as the country heads toward elections later this month.
Week ahead for the Japanese yen
The Japanese markets are closed on Monday, October 9, 2017, for health-sports day, and the remaining days of the week have no major data to be reported. Throughout the week, in the absence of any geopolitical tensions, the Japanese yen is likely to be influenced by the demand for the US dollar. Uncertainty surrounding the Japanese elections is likely to tilt the bias toward a further depreciation of the yen.