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Will Safe-Haven Demand Push the Japanese Yen Higher?

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Yen gains from global risk aversion

Last week, the Japanese yen (JYN) managed its first weekly gain against the US dollar in nine weeks as global risk aversion increased in response to political and geopolitical uncertainties. The yen (FXY) closed the week at 109.39, rising 1.2% against the US dollar (UUP).

The news about US President Donald Trump canceling the US–North Korea summit and political uncertainties in Europe increased the demand for safe-haven assets, including the yen. Japanese equity markets (EWJ) succumbed to global pressure, posting their third negative weekly close in the last 15 weeks. The Nikkei 225 (JPXN) posted a fall of 2.1% in the week.

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Speculators decrease bullish bets

Yen (YCL) speculators increased their bearish bets on the yen for the week ending May 25. As per the latest Commitments of Traders report, which was released by the Chicago Futures Trading Commission on May 25, speculators on the yen had net short positions totaling 2,767 on May 22 compared to 3,680 on May 15.

The outlook for the yen

Risk aversion across the globe will likely be a key driver for the yen’s price action this week. The data scheduled to be released on the country’s labor market in the week include the unemployment rate and the job openings-to-applicants ratio. 

The Japanese job market has been tightening in recent months, with more than 150 jobs available for every 100 job seekers, but this has not been leading to wage growth. The week will also include data on April’s retail sales, but the data are unlikely to have any major impact on the yen’s performance.

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