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What's Behind the Yen's Slide

Don Farrall | Photographer's Choice RF | Getty Images

Here's hoping you don't have vertigo, because if you have been watching the yen slide, you could have a problem.

In the wake of a call for early elections by Japan's prime minister, and for aggressive easing by the opposition leader, the Japanese currency is wrapping up its worst week in months.

But Geoffrey Yu, an FX strategist at UBS, says this is not a sea change.

"We're comfortable with saying there will be a structural change further down the line, but right now it just seems a lot of people are being squeezed," he told CNBC.

Yu argues that at the moment there is "too much focus on what potentially may happen in Japan," what with all the political turmoil. "No one's looking at the true driver of dollar-yen higher which is U.S. yields." There is also the matter of investors chasing returns before year end and the looming fiscal cliff, he says. (Read more: What Is the Fiscal Cliff? CNBC Explains)

Is the opposition's call for easing a game changer for the currency?

"This is a game changer on the Japan side," Yu says, and the talk may justify slightly higher levels for the dollar against the yen. But he is skeptical that easing will lead to significantly more weakness.

The Bank of Japan "has been very loose for decades now, and we still see dollar-yen trading around 80," Yu says.

There is one thing that could move the dial, in his view: "If you see U.S. yields go to 3% by the end of the year, you don't need to care what happens in Japan."

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