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James Hyerczyk

The Dollar/Yen is trading flat-to-slightly lower on Friday after giving up some of its earlier gains. The move comes as a bit of a surprise since appetite for risk is a little stronger. Furthermore, just hours ago the Bank of Japan issued another dovish monetary policy statement. Traders are saying that safe-haven buying related to renewed concerns over North Korean nuclear weapons is encouraging investors to move money into the safety of the Japanese Yen. Slightly weaker U.S. Treasury yields are also helping to make the dollar a less-attractive asset.

At 07:54 GMT, the USD/JPY is trading 111.669, down 0.039 or -0.04%.

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Brexit and Trade Talks

Optimism over a possible delay in Britain’s exit from the European Union is helping to generate some demand for risk. Additionally, investors seem to have shifted their tone to more positive in regards to the timing of a U.S.-China trade deal.

According to a report by Xinhua news agency, Chinese Vice Premier Liu He spoke via telephone with U.S. Trade Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer. Earlier in the session, traders were growing a little concerned about the lack of progress towards a trade deal. Traders took this position after President Trump said on Thursday that the U.S. would probably know in the next three or four weeks about a possible trade deal with China.


BOJ Remains Dovish

In Japan, the Bank of Japan (BOJ) kept monetary policy unchanged as expected. According to the BOJ, short-term interest rates will remain at minus 0.1 percent. Furthermore, it said the central bank will purchase government bonds so that the 10-year JGB yields will remain at around zero percent.

In its policy statement, the BOJ offered a relatively weak assessment of the Japanese economy and predicted it will “continue its moderate expansion, despite being affected by the slowdown in overseas economies for the time being.”

Later in the session, BOJ Governor Haruhiko Kuroda said, “It is true Japan’s exports and output are being affected by slowing overseas growth. On the other hand, domestic demand continues to grow. As such, as maintain our baseline view that the economy is expanding moderately.

“It is likely to take longer to achieve our price target. However, the output gap is improving…Most board members think it’s most appropriate to patiently maintain our current stimulus program.”

North Korea and Nuclear Talks

Traders are saying some light safe-haven buying into the Japanese Yen is being fueled by a report that North Korea is considering suspending nuclear talks with the United States. Russia’s TASS news agency reported North Korea’s vice foreign minister said the country is considering suspending nuclear talks with the United States.

Daily Forecast

Falling Treasury yields could put a lid on the USD/JPY while demand for risk could underpin the Forex pair. This could lead to a rangebound trade. The wildcards today appear to be renewed North Korean concerns and a slew of U.S. economic data.

In the U.S., traders will get a chance to react to reports on Empire State Manufacturing, Capacity Utilization, Industrial Production and Consumer Sentiment. We’re also going to see fresh news on the JOLTS Job Openings, Inflation Expectations and TIC Long-Term Purchases.

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