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Watch Gold to Figure Out Where Yen Is Going, Says UniCredit

A statistical analysis of the drivers of the dollar-yen exchange rate this year suggest that gold is the “principal” determinant, according to UniCredit SpA strategist Vasileios Gkionakis.

The study assessed the role that U.S. and Japanese bond yields -- along with global equity prices, gold and the trade-weighted dollar -- play in driving the dollar-yen rate. “The striking feature of the results is that gold has the greatest explanatory power by a wide margin over U.S. 10-year yields (which rank second),” Gkionakis wrote in a note out Thursday.

This week, appreciation in the yen has started narrowing a recent deviation between the magnitude of the climb in gold and the levels for dollar-yen, Gkionakis said. According to his group’s estimates, a short-term “fair value” would be around 107 per dollar. The currency was steady at 108.44 as of 10:36 a.m. in Tokyo Friday.

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