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Dollar carnage in yen’s wake not likely to change the overall trend

Posted by WorldWideMarkets . on May 24, 2013 3:38:00 AM
Dollar carnage in yen’s wake not likely to change the overall trend
Carnage aside on the yen Wednesday, with volume doubling on some global brand name trading platforms, it’s still onward and upward for the dollar against the yen. Diverging monetary policies in the U.S. and Japan, and an increase in Japanese yields will only make the Japanese monetary authorities double efforts to stoke growth by easing and end the never-ending malaise. After the last round of rhetoric, Japanese authorities are clearly, and really, not willing to settle for more of the same. The rise in U.S. yields is going to attract Japanese interest as they search for yield. Expect resistance at 105.16, the next 4-1/2 year peak to break, but don’t expect the yen to head back much below 100 if it goes that far. There is just too much working in the dollar’s favor against the yen with the only unknown being when the Fed will at least slow down its bond buying. Of course, if you got caught on the wrong side of the trade it is going to hurt but markets always over react. Japanese Economic Minister Akira Amari may be one of the few who is happy. It will be interesting to see the CFTC data today on net shorts but bear in mind that the data will only reflect positions through to Tuesday night in New York, not Thursday’s action in Tokyo and elsewhere on the globe. Last week’s net shorts were 88,407 contracts but though heavy, that was only the most since April 16. Nikkei recovered 0.9 percent in the Tokyo session, wait and see where the yen is at the end of the global trading day.Japanese yen

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