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Could the Japanese Yen Bounce Back This Week?

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Apr. 19 2018, Updated 9:03 a.m. ET

Japanese yen depreciates despite increased risk aversion

The Japanese yen (JYN), a safe haven asset, has failed to appreciate despite an increase in uncertainty in recent weeks. Despite ongoing trade war concerns and the US-led attack on Syrian chemical weapon facilities, the yen fell. In the week ended April 13, the yen (FXY) closed at 107.3 against the US dollar (UUP), depreciating by 0.38%. Japanese equity markets (EWJ), on the other hand, rallied along with global markets, with the Nikkei 225 (JPXN) posting a weekly gain of 0.98%.

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Speculators decrease bearish bets on the yen

Japanese yen (YCL) speculators decreased their net long positions on the currency and are moving back to negative territory, according to the latest Commitment of Traders report, released on April 13 by the Commodity Futures Trading Commission. As of Tuesday, April 10, yen speculators had net long positions of 2,761 contracts, compared with 3,572 short contracts the week before. The week was the second week since December 2016 in which speculators were long on the yen as uncertainty increased. With many risks now subsiding, we could expect speculators to turn bearish on the yen again.

The week ahead for the Japanese yen

This week, Japanese prime minister Shinzō Abe is scheduled to meet with Donald Trump, possibly to discuss North Korea and trade tariffs. Japan is an export-dependent nation, and any additional tariffs on its exports could hurt its economy. March export data is scheduled to be reported this Wednesday and is expected to show some weakness, as recent economic data has failed to impress. Japan’s inflation report is scheduled to be released this Friday, and only a positive surprise could help the yen recover some of its recent losses.

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