USD/JPY Settles Around 98 After Japanese Cut Foreign Debt Holdings

The yen remained higher against most major peers after Japanese data showed domestic investors sold foreign bonds for a fifth week, casting doubt on whether monetary stimulus will continue to weaken the currency.

Demand for the yen was also supported after the world’s third-largest economy posted a narrower-than-estimated trade deficit last month. The currency has weakened by almost one fifth in the past six months as the Bank of Japan (8301) increased cash provisions to combat deflation. The Dollar Index (DXY) remained higher as Asian stocks fell, boosting demand for the greenback as a haven.

“This tremendous weakening in the yen has produced little more than profit taking by the Japanese themselves,” said Sean Callow, a senior foreign-exchange strategist in Sydney at Westpac Banking Corp. (WBC) “It gives the impression that money is not flowing out of Japan at all right now, so it’s at least cause for investors to have a bit of a rethink” about the effectiveness of BOJ policy.


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