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Will Japan's life insurers stem yen's surge?

Yield-starved providers abandon currency hedges on bond purchases

TOKYO -- Japanese life insurance companies are poised to step up investment in foreign government bonds without currency hedges, a move that may help serve as a bulwark against the yen strengthening past 110 per dollar.

Many life insurance providers hold foreign bonds with currency hedges that prevent their values from falling below par during adverse currency fluctuations. A common way to hedge is to sign yen future contracts or similar instruments that lock in exchange rates. That set of transactions has a neutral effect on the foreign exchange market, meaning the yen does not weaken as a result.

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