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Forex Carry trades in focus after BOJ policy stimulus
Forex Carry trades in focus after BOJ policy stimulus LONDON (Reuters) – The Japanese yen weakened visits main rivals lurking below a four-month high vs US dollar, as investors looked to add bets playing into the divergence between rising Western government bond yields and a dovish Bank of Japan.
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Year-on-year, manufacturing production increased by 0.8%, less than the expected 1.1% advance.
The report also showed that industrial production slipped 0.1% in May, compared to expectations for a 0.6% rise.
U.S. job growth surged more than expected in June and employers increased hours for workers, signs of labor market strength that could keep the Federal Reserve on course for a third interest rate hike this year despite sluggish wage gains.
Bond yields have also diverged in recent weeks, helping carry trade punters, with the spread between 11-year U.S. Treasury yields and its Japanese counterpart at its widest in two months, thanks to rising U.S. yields.
On Friday, the BOJ sought to keep Japanese government bond yields near its policy target, embarking on a special market operation as well as increasing the size of its regular JGB purchase operations.
With latest data showing net long positions on the U.S. dollar at its lowest since mid-May 2016 after a run of lackluster economic figures, the dollar may have some more room to against the yen as some investors cover back positions.
Against the euro, the yen was trading at 130.88 its highest level since Feb. 8th 2016.