Why the Japanese Yen Fell after the Bank of Japan’s Statement
Bank of Japan leaves policy unchanged
The Japanese yen (JYN) continued depreciating against the majors as political stability guaranteed the continuation of Abenomics. For the week ending November 3, the Japanese yen (FXY) closed at 114.08 against the US dollar (UUP), depreciating 0.34%. The Japanese lower house of parliament reelected Shinzo Abe as Prime Minister after his coalition party won in the snap elections on October 22. The continuation of the policy was assured by the Bank of Japan in its November policy statement, where no changes were made to interest rates and the bond-buying program.
Japanese equity markets (EWJ) advanced last week with the Nikkei 225 (JPXN) posting a weekly gain of 2.41% for the week ending November 3. This is the eighth consecutive positive weekly close for the index.
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Speculators increased bearish bets on the yen
Japanese yen (YCL) speculators increased their net short positions on the yen, as per the latest “Commitment of Traders” (or COT) report released on November 3 by the Chicago Futures Trading Commission (or CFTC). On October 31, total net speculative short positions rose to 118,869 contracts from 116,857 contracts. With uncertainty almost out of politics and policy, further depreciation can be expected.
Week ahead for the Japanese yen
This week is likely to remain a calm one for the yen as well. There are no major economic data to be reported from the developed world that could move the foreign exchange markets. In Japan, total cash earnings are important data. The rise in earnings is key to lifting Japanese inflation higher, which is the key objective of the Bank of Japan.