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Bank of Japan: Weak Data Might Mean More Easing

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Apr. 24 2018, Updated 6:30 a.m. ET

Japanese yen depreciated against the US dollar

The Japanese yen (JYN) continued its depreciating trend in the previous week. Risk aversion receded and the US dollar rallied following higher bond yields and commodity prices. Now that geopolitical risks have declined, the demand for the yen as a safe haven will likely be low and could lead to more depreciation. Recent data from Japan haven’t been encouraging. For the week ending April 20, the Japanese yen (FXY) closed at 107.67 against the US dollar (UUP) and depreciated 0.31%. Japanese equity markets (EWJ) rallied along with global markets. The Nikkei 225 (JPXN) posted a weekly gain of 1.8% the previous week.

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Speculators decreased bearish bets on the yen         

For the Japanese yen (YCL), speculators decreased their long positions for the third consecutive week as risk aversion declined across the markets. According to the latest Commitment of Traders report released on April 20 by the Chicago Futures Trading Commission, speculators on the Japanese yen had a net long position of 2,591 contracts—compared to 2,761 short contracts the previous week.

What to expect this week

This week, the Bank of Japan’s policy meeting will likely be the major event for the Japanese yen. The Bank of Japan is expected to leave qualitative monetary easing with a yield curve control policy unchanged at this week’s meeting. The Japanese economy has lost some momentum. In the absence of any risk-off events, the Japanese yen will likely depreciate against the US dollar this week.

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