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After a mixed performance last week, the yen is turning in a much more impressive performance this week since the yen is currently the one currency to rule them all (as of 9 am GMT).

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

As usual, JPY pairs were roughly tracking bond yields. And since bond yields are lower for the week, the yen got a bullish boost.

And according to market analysts, bond yields are down in the dumps because of safe-haven demand for bonds due to risk aversion in the run-up to the FOMC statement, as well as risk aversion because of the FOMC statement, although year-end portfolio balancing was also cited.

Speaking of risk aversion, the prevalence of risk aversion this week also very likely helped to fuel demand for the yen.

In particular, rumors that the U.S. Department of Justice (DOJ) was planning to indict two Chinese hackers who are allegedly linked to the Chinese government, appear to have spurred demand for the yen, causing most JPY pairs to decouple from recovering bond yields on Thursday.

By the way, those rumors were true since the DOJ did just that.

Other than that, fears of a potential U.S. government shutdown began to grow during Thursday’s U.S. session, which likely fueled safe-haven demand for the yen as well.

And as a side note, the BOJ delivered its latest monetary policy decision during Thursday’s Asian session, but that was a dud since the BOJ didn’t really say anything essentially new.

BOJ Shogun’s presser was also practically a dud since he said the usual stuff, such as the BOJ’s optimistic outlook on the Japanese economy and the BOJ’s neutral stance, as well as the BOJ’s mantra that:

“There is no need to exit easy policy and it’s too early to debate a strategy now.”

The only thing that’s somewhat new is that Kuroda openly said that:

“If we think doing so would be necessary to sustain the momentum for achieving our price target, we will ease monetary policy further as appropriate.”

“Options include cutting the short-term interest rate target, lowering the long-term yield target, ramping up asset buying and accelerating the pace of increase in base money. Should the need arise, we will take steps as appropriate.”

However, Kuroda kept stressing that there’s no need to ease monetary policy any further, which is why the BOJ is maintaining its neutral stance (and why the event was a dud).