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The yen fell after the Bank of Japan gave no hint of readiness to raise rates further in the coming months

Market analyst Sam Coventry wrote that the yen fell after the Bank of Japan did not signal that it was ready to raise rates further in the coming months. However, the general deterioration in market sentiment is helping the yen become a traditional “safe haven” relative to other currencies such as the pound.

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Last week, the Bank of Japan kept interest rates at current levels, a decision that was not surprising. Markets have been interested in how the central bank will communicate its next move and whether it will modify its long-standing quantitative easing program aimed at lowering borrowing costs.

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Ahead of its July policy meeting, the Bank of Japan will collect opinions from market participants on reducing its purchases of Japanese government bonds. The Bank of Japan’s next meeting will be held on July 31.

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For more than a year, the yen has been the worst performing currency in the G10 currency space as other central banks have raised interest rates and reached agreements with QT to fight inflation. These measures have also raised bond yields, making them attractive to Japanese investors who can still borrow at interest rates close to zero.

The subsequent capital flows mean that yen is sold to finance foreign purchases. However, yen weakness is a concern for Japanese policymakers, and any decision to change interest rates will be because they are concerned about the depreciation of the yen.

The Bank of Japan has intervened in foreign exchange markets, but only when market volatility is difficult to control. Since recent exchange rate fluctuations are relatively controllable, the risk of recent intervention is low, and the yen can continue to depreciate steadily.

Market analyst Sam Coventry said that the market noticed that the yen was getting some support from the deterioration of global investor sentiment, which is related to the growing concerns about the French economy and debt markets.

French President Macron’s unexpected call for early parliamentary elections at the end of this month seems to be counterproductive because both the left and the right have the opportunity to win a majority of seats and squeeze Macron’s centrist party into oblivion.

Market analyst Sam Coventry said that if this crisis continues to ferment, the yen will continue to be supported against European currencies, the pound and commodity currencies.

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