One Word... Yen

June 22, 2012 1:33 PM EDT
With all the action in the commodities market this week, traders are overlooking an interesting development in the currency markets. The U.S. dollar is set to post its biggest weekly gain against Japan's currency in four months. Additionally, the yen weakened against all 16 major currencies. Nomura analysts say the Yen's decline is tied to a bill before Japanese lawmakers in the lower house who are prepared to vote to double sales tax.

"There may be some overseas investors reacting to political uncertainty over the tax debate and concern about a possible downgrade of Japan’s credit rating," Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co wrote in a note to clients today.

Keep an eye on USD/JPY and CurrencyShares Japanese Yen Trust (NYSE: FXY) in the coming days as they might signal an additional breakdown in Yen.

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