18.04.201302:44:16UTC+00Yen continues to surge after Japanese trim foreign debt holdings

The yen stayed higher versus most major counterparts after Japanese data showed domestic investors sold foreign bonds for a fifth week, casting doubt on whether financial stimulus will continue to bring down the currency.

Demand for the yen was also aided after the world’s third-biggest economy displayed a narrower-than-estimated exchanged deficit last month. The currency has weakened by almost one fifth in the past six months as the Bank of Japan (8301) boost cash provisions to fight deflation. The Dollar Index (DXY) remained greater as Asian stocks decline, increasing 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.

The yen fetched 98.11 per dollar as of 11:19 a.m. in Tokyo after giving up 1.4 percent in the past two days to 98.12. It was little changed at 127.97 per euro. The dollar exchanged at $1.3043 per euro following a 1.1 percent increase to $1.3032 yesterday.

The Dollar Index, which tracks the greenback versus the currencies of six major trade partners, acquired a small moved at 82.591 after jumping 1.1 percent yesterday. The MSCI Asia Pacific Index of shares submerged 0.5 percent.

Group of 20 finance ministers and central bankers meet for two days in Washington starting today, before weekend talks of the International Monetary Fund and World Bank.

Foreign Investments

Japanese investors cut their holdings of foreign debt by 331.9 billion yen ($3.4 billion) in the week ended April 12, according to data from the Ministry of Finance. That followed a net sale of 1.14 trillion yen the prior week, the most in a year.

The nation’s imports exceeded exports by 362.4 billion yen in March, a separate report from the ministry showed. That compared with the 522.2 billion-yen deficit estimated by economists in a Bloomberg News survey.

BOJ Governor Haruhiko Kuroda unveiled a plan on April 4 to double the central bank’s holdings of government debt and stock funds in two years. Japan’s trade partners have expressed concern over the move, with the U.S. Treasury saying in its semi-annual currency report that Japan must “refrain from competitive devaluation.”

The yen relinquished 19 percent over the past six months, the worst movement among 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar increased 2.7 percent and the euro bolster 2.5 percent.

IMF Chief Economist Olivier Blanchard said on April 16 that the yen’s depreciation is a “logical consequence of appropriate monetary policy” by the BOJ.

At their last assembly in February, the G-20 signaled that Japan may stimulate its stagnant economy as long as policy makers abstain from publicly advocating a submerging yen.

“The yen still remains in a weakening trend,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The G-20 won’t probably tell Japan to refrain from devaluing the currency, but is more likely to leave exchange rates to the market.”