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After closing on the red on Wednesday, the JPY has taken hold of the 102 handle on Thursday, dodging the one-week lows against the dollar amid doubts that possible further easing by the Bank of Japan would cause a significant downside for the currency.

The yen firmed as investors looked for safe havens amid the weakening share markets, though other major currency pairs are not so much affected also because of the Japan and Federal Reserve policy meetings scheduled next week, September 20-21. These two meetings are producing quite a whirlwind in the markets. Concerns about the policy effectiveness of the world’s major central banks have triggered a steepening trend in bond yields in the recent sessions. A decline in the feeling of risks has reinforced the Japanese currency due to its perceived safe-haven status.

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Mitul Kotecha, head of FX strategy at Asia-Pacific for Barclays in Singapore said, "It's interesting that we're seeing a little bit of risk aversion creep in. That itself is having some impact on markets, and we're seeing the yen firm up on the back of that. If there's a theme ahead of next week's events, it is that risk theme.”

The Bank of Japan’s decision was put on the spotlight because of a report on Wednesday suggesting a further move on negative interest rates could be announced on the same day the Federal Reserve decision on a rate hike is announced, possibly producing spillover effects. But there is no consensus in the BOJ yet on whether they would deepen negative rates at next week’s meeting where they conduct comprehensive assessment of their policies or not. Goldman Sachs expects the BOJ “to maintain its current policy framework at next week's meeting and rather use the comprehensive assessment to increase the visibility of future policy direction.”

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USD/JPY Analysis

The pair opened at 102.412, 0.14% lower than Wednesday’s open at 102.554. On the early trading, however, the yen rose to its current highs of 102.599, which is over yesterday’s close of 102.411. Its current low is at 101.931, which tested the resistance at 102.049. It, however, refused to stay there and is still fighting to beat yesterday’s performance and close on the green.

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