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Global Macro: A Closeup on the Asian Pacific

Staying with the theme of the Japanese economy, the yen was able to break below the 100 mark versus the U.S. dollar. A catalyst for the broken barrier lies with the increase in foreign investment on the part of Japanese investors. When the Bank of Japan announced its aggressive policy, many people saw this as an opportunity for a flight of money out of Japan, towards foreign markets. As the yen falls, people sell Japanese bonds, and the interest rate increases as the Bank of Japan had hoped.

The issue with this is that the Japanese bonds, as low as their rates may be, act as a safe haven buy. When people start dumping Japanese bonds, it is a sign that risk assets are seen in a favorable light. The chart below is of DB Japanese Government Bond Futures ETN (JGBL). The asset's break of its trend line confirms that selling of the yen has picked up steam. As investors sell the yen in order to buy foreign bonds, the yen should continue lower and Nikkei should push higher.

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JGBL $21.74 -3.40%
USO $19.89 0.25%
XRT $99.69 0.92%
RSP $82.21 0.78%
DBC $17.86 -0.45%


DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

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