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Japanese yen gains against dollar

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Japanese Bonds May Rise as Strengthening Yen Deepens Deflation
Aug. 11 (Bloomberg) -- Japanese benchmark bonds may gain for a fourth day as the yen's advance against the dollar will help push import prices lower, fueling deflation and preserving the value of debt's fixed payments.

The yen rose about 1 percent against the dollar last week. A stronger currency may also squeeze profits on exports, which accounted for about half of economic growth in the fourth quarter.

``The strong yen is good for the Japanese government bond market,'' said Xinyi Lu, Tokyo-based chief strategist at UFJ Bank Ltd., the banking unit of the nation's fourth-largest lender. ``No one believes deflation in the economy will disappear.''

Ten-year bond futures for September delivery rose to 142.15 on the London International Financial Futures Exchange from 142.12 at the 3 p.m. close in Tokyo Friday. The contract will open for trading at 9 a.m. Tokyo time.

The 1 percent bond due in 2013 rose on Friday, pushing its yield down 3 basis points to 0.87 percent, according to Japan Bond Trading Co. A basis point is 0.01 percentage point.

Nationwide prices excluding fresh food fell 0.4 percent in June from a year earlier and haven't risen since April 1998. Deflation bolsters the value of debt's fixed payments.

The yen traded at 119.03 to the dollar as of 7:15 a.m. in Tokyo. It gained 1.1 percent to 118.96 in New York trading on Thursday.

Last Updated: August 10, 2003 18:23 EDT

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