How the Japanese Yen Is Coping with Election Uncertainty
Yen continues to slide after election announcement
The Japanese yen (JYN) closed September with a depreciation of 2.29% against the US dollar. For the week ending September 29, the Japanese yen (FXY) closed at 112.49 against the US dollar (UUP), depreciating 0.46%. Lack of geopolitical tension led to reduced demand for the yen as a safe haven. The announcement of snap elections by Japanese Prime Minister Abe added to the yen’s weakness.
Japanese equity markets (EWJ) turned positive with the Nikkei 225 (JPXN) posting a weekly gain of 0.29% for the week ending September 29. A deprecating yen is positive for many Japanese companies, as most of these companies are net exporters and a weaker yen is good for their revenue.
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Speculators decreased bearish bets on the yen
Japanese yen (YCL) speculators raised their short positions in the yen, as per the latest “Commitment of Traders” (or COT) report released on September 29 by the Chicago Futures Trading Commission (or CFTC). Total net speculative positions stood at -71,347 contracts, compared to -51,322 contracts for the week ending September 22.
Week ahead for the Japanese yen
The economic data scheduled to be reported from Japan this week include a lot of data on the manufacturing sectors. The data reported on Monday showed sharp gains in the Tankan Big Manufacturing and large manufacturers indexes, but this news had no positive impact on the yen. The focus is likely to remain on the snap elections expected to be conducted on October 22.
This week, demand for the US dollar is likely to play a major role in determining the yen’s price action, but the overall trend is likely to remain weak—at least until the Japanese elections.