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THE INSIDE JAPAN COLUMN: Yen Advances on Fed, Concern Over U.S. Politics: Inside Japan

(Bloomberg) — Yen gains for a second day as U.S. Treasury yields and dollar fell after FOMC minutes showed concerns about achieving inflation target and President Donald Trump disbanded his advisory groups.

  • USD/JPY falls 0.1% to 110.04 after losing 0.4% Wednesday
  • “U.S. political uncertainty and geopolitical risks in North Korea put USD/JPY under pressure,” says Yoshitsugu Fujita, vice president for global markets at Sumitomo Mitsui Trust Bank in New York
    • Dollar could test 108-109 yen levels
    • Still-high speculative yen shorts are likely to weigh on USD/JPY
  • “Uncertainty over the timing of the Fed’s rate hike increased after FOMC minutes,” Naoto Ono, currency analyst at Ueda Harlow Corp in Tokyo, writes in note
  • Japanese investors sold a net 145.5b yen of overseas bonds in week ended Aug. 11, first selling since June 30
  • Trade surplus shrank 4.8% to 418.8b yen in July; still higher than the 327.1b yen estimated by economists

BONDS

  • Futures of 10-year govt notes closed after-hours trading at a session high of 150.71, a level unseen since June 8
  • Treasury 10- year note yield fell 5bps to 2.22% Wednesday
  • Finance ministry to auction 2.2t yen of 5-year notes; results at 12:45pm Tokyo time
  • A drop in USD/JPY basis swaps is fanning expectations that 5-year note sale will draw strong demand from overseas investors, Katsutoshi Inadome, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, writes in note

–With assistance from Mika Otsuka. To contact the reporter on this story: Chikafumi Hodo in Tokyo at chodo@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Masaki Kondo

People
Donald Trump (United States of America)
Katsutoshi Inadome (Mitsubishi UFJ Financial Group Inc)
Naoto Ono (Ueda Harlow Ltd)
Yoshitsugu Fujita (Sumitomo Mitsui Trust Holdings Inc)

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