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Trade Tensions Could Push the Japanese Yen Higher

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Japanese yen appreciated 1.1%

The Japanese yen (JYN) regained its strength against the US dollar. Risk aversion led to increased demand for the safe-haven currency. The other factor that contributed to the yen’s appreciation was the comment from Bank of Japan Governor Haruhiko Kuroda. Kuroda used the word “exit” when referring to the central bank’s accommodative monetary policy program. For the week ending March 2, 2018, the Japanese yen (FXY) closed at 105.75 compared to the US dollar (UUP) and appreciated 1.1%. Japanese equity markets (EWJ) posted their first weekly decline in three weeks. The Nikkei 225 (JPXN) posted a weekly loss of 3.3% the previous week.

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Speculators’ decreased bearish bets on the yen         

The Japanese yen (YCL) speculators decreased their net short positions on the yen for a third consecutive week, according to the latest Commitment of Traders report released on March 2 by the Commodity Futures Trading Commission. As of February 27, the Japanese yen speculators had a net short position of 96,651 contracts—compared to 108,338 short contracts the previous week.

Japanese yen this week

This week, the focus will likely be global risk aversion arising from the US tariff plan. The demand for the Japanese yen increases during times of elevated risk aversion. The yen is considered as a “safe haven.” The Bank of Japan is scheduled to conclude its March monetary policy meeting on Friday. No changes are expected to the current QQE with a yield curve control policy at the meeting. We can also expect more clarification from the central bank governor regarding the exit plan, which likely won’t begin before 2019.

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