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Currency markets convulsed by loss of confidence in central banks

If a war has been waged in the global foreign exchange markets for the past few years and a truce has just been declared, as some investment strategists claim, then Japan could be forgiven for wanting the conflict to resume.

     Since the Bank of Japan stunned financial markets on Jan. 29 by adopting a negative interest rate policy, the yen has surged nearly 11% against the dollar. That was exactly the opposite of what the central bank intended with its aggressive rate cuts and dealt another blow to "Abenomics," the three year-old reflationary program of premier Shinzo Abe that has conspicuously failed to ignite inflation and growth. While the yen weakened a little last week as global equity markets rallied, the damage has already been done.

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