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JPMorgan Chase Meera Chandan, co head of global foreign exchange strategy, said that the yen was in a rather unstable region due to the lack of action by the Bank of Japan.
"If the market adjusts its expectation of the Federal Reserve and the last 30 basis points of interest rate cut is removed, the dollar yen can easily rise by 3% to 5%," she said in an interview on Tuesday.
"If the weakness of the yen is indeed a policy concern for Japan, then they need to change their monetary policy, and the fact that they choose not to do so gives a green light for further weakening," said Chandan.
This week's US data and the Federal Reserve meeting will determine the trend of US yields.
Chandan said that if the US data is firm, the US dollar may rise, but the Japanese authorities' foreign exchange intervention will not be so effective, because the weak yen is due to huge policy differences.
"What the Bank of Japan hopes, frankly, and probably what most Asian central banks hope, is that the inflation data of the Federal Reserve and the United States are really useful to them," she said. "The U.S. yield will have to fall sharply before the yen and other Asian regions can really make a comeback."
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