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THE INSIDE JAPAN COLUMN: Yen Halts 3-Day Gain as Bannon Exit Boosts Dollar: Inside Japan

(Bloomberg) — The yen halts a three-day gain as the departure of Steve Bannon from the Trump administration helps boost the dollar. Trading is subdued before the U.S. and South Korea start a military drill Monday.

  • USD/JPY rises 0.1% to 109.26 after falling to a four-month low of 108.60 on Friday
  • “The market is taking the departure of Bannon as a positive factor for the dollar as he was seen as taking the hardline stance in the Trump administration,” says Hiroshi Yanagisawa, chief analyst at FX Prime by GMO in Tokyo
    • Active dollar-buying could be limited as the market is nervous about the U.S.-South Korean military exercises scheduled to begin today
    • USD/JPY likely to be supported below 109 after strong bids emerged around the four-month low; retail investors showing strong interest
  • President Trump’s job approval rating is below 40% in 3 key Midwest states that helped propel him to the White House, voters in those states are leaning toward Democrats for the 2018 midterms, according to NBC/Marist polls

BONDS

  • JGB 10-year yields rise 0.5bp to 0.035% after dropping to 0.03% Friday, lowest since May 10
    • 5-year yield fell to -0.105% Friday, lowest since June 7
  • “JGB market is expected to carry over its bullish sentiment from last week with geopolitical tensions and weakness in the equity market,” Katsutoshi Inadome, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, writes in note
  • Market to watch military exercises as they may heighten political tensions in the Korean peninsula, he writes
  • 10-year JGB yield seen moving in range of 0.030-0.035% on Monday: Inadome

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 Nicholas Reynolds

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