The U.S. dollar/Japanese yen went past the 100 mark for the second time this year on Wednesday, but markets aren't cheering, which is in sharp contrast to the euphoria in May when the pair first crossed this key level.
"The yen at 100 is significant psychologically, but we're not going to get the hysterical cries for 120/130 yen to the dollar that we had before," said Patrick Bennett, forex strategist at the Canadian Imperial Bank of Commerce (CIBC).
The yen hit 100.85 against the dollar in Asian trade on Wednesday, but analysts don't expect a rapid weakening from here in the months ahead.
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"We do expect the yen to go higher eventually, but it is likely to stay in the range of 95 to 105 to the dollar this year, and between 100 and 110 in 2014," said Bennett.
The CIBC analyst added that Japanese investors' reluctance to move their investments offshore was holding back the yen from weakening dramatically.
The yen has been one of the most talked about global currencies this year, amid its rapid depreciation against the dollar over the past nine months.
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Japanese Prime Minister Shinzo Abe's radical policies or "Abenomics" designed to overhaul Japan's flagging economy and end deflation, have worked to weaken the currency by 25 percent since mid-November, in a boost for the world's third largest economy's struggling export sector.
The yen first hit the psychologically important 100 to the dollar on May 9, its weakest level since mid-2008, leading analysts then to forecast that the seemingly unstoppable free-fall would take the currency to levels of around 130. However, after hovering between 100 and 102 for much of May, the currency saw some renewed strength in June, moving back up to around 94 to the dollar and raising doubts over whether the yen would continue on its weakening trend.
Nizim Idris, head of strategy, fixed income and currencies at Macquarie bank, has a target of 110 for the dollar/yen by the year-end.
According to Idris, recent weakness in the yen has been driven by the perception that Abe will likely win the elections to the upper house of parliament on July 21, giving legitimacy to his policies.
"A win at the upper house elections will increase his legitimacy and wriggle room in terms of what he can push through. It will legitimize 'Abenomics' ... we could get 105 to the dollar in the next few months on this," he added.
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Although domestic policy in Japan plays an important part in influencing the dollar/yen cross rate, the other half of the story is what's happening with the U.S. dollar. The greenback has strengthened considerably in recent months, amid talk that the U.S. Federal Reserve's tapering of its massive bond buying program could happen sooner than expected, helping yen weakness.
Some analysts say a pullback in dollar strength, could provide the next bump in the road for the yen.
"A lot of the dollar strength is driven by expectations of Fed tapering in September, a lot of that is in the price," said Idris.
However, he added that a disappointment in U.S. economic data could derail the weakening trend.
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"U.S. payrolls this Friday will be pivotal, it is possible that this data could weaken the dollar," said Idris, referring to the upcoming June non-farm payrolls report. Economists have forecast an increase of 165,000 jobs.
Stan Shamu, market strategist at trading firm IG, added that U.S. economic data would be a driver of the dollar/yen in the coming weeks.
"The next level of resistance is at 101 yen and with plenty of U.S. event risk on the way we feel there is potential for further volatility. Japan would be hoping to see some strong readings from these releases to spur further dollar strength. This would then push dollar/yen higher," said Shamu.
Another factor which could halt the yen weakening trend could be another bout of risk aversion, said Macquarie's Idris, which would prompt investors to scramble out of riskier assets and into traditional safe havens like the yen.
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"There are lots of issues driving this cross: the Japan domestic factor and what's going on in the U.S. and Europe. On its own, the yen is on a weakening trend but its link to the dollar is an issue, along with another bout of risk aversion. One possibility [risk aversion event] is Europe, with what's happening in Greece, Portugal and the Middle East," said Idris.
Risk aversion has spiked this week after Greece was given three days to reassure Europe and the International Monetary Fund that it could deliver on its bailout conditions, while the resignation of Portugal's foreign minister Paulo Portas threatened a political crisis in the troubled euro zone economy.
Meanwhile social unrest in Egypt has heightened as protests against President Mohamed Morsi continue to unsettle global investment sentiment.