TOKYO (AFX-ASIA) - The dollar was rangebound against the yen in midafternoon trading due to the absence of foreign investors ahead of the approaching Easter holidays, dealers said. While a firmer performance on the local stock market is preventing any sharp appreciation of the dollar against the yen, concerns over massive capital outflows form Japan in the new fiscal year are supporting the US currency, they said. Comments made overnight by William McDonough, President of the Federal Reserve Bank of New York also pressured the top-side of the dollar, dealers said. "The exchange rate, if you look at purchasing power parity, the dollar is slightly overvalued," he said. North Pacific Bank foreign exchange manager Toshikazu Shimamura said McDonough's remarks, since they provoked speculation about the underlying wish at the Fed for a shift from a strong dollar policy, are likely to continue to discourage investors from re-testing the top-side of the dollar immediately. "Whether or not the US administration will gear up towards a shift in the foreign exchange policy will continue to be the focus of the market this year," he said. In addition, many investors adopted a wait-and-see stance ahead of the release of major economic indicators, including industrial production data, seeking confirmation of ongoing improvement in local economic activity, dealers said. The Bank of Japan will also announce on Monday the quarterly Tankan report on business sentiment. "Now that the market has largely priced in expectations of a likely improvement in the local economy, we need solid evidence that the economy has finally started to move forward," Shimamura said. "Without such evidence, we are unable to buy up the yen so aggressively." The market is also watching closely the investment stance of domestic institutional and retail investors following the introduction of a limited depositor protection scheme, or 'pay-off' from April, dealers said. "It is far from clear what the extent of capital outflow related to the implementation of 'pay-off' will be, but it seems to be almost certain that local investors will not reduce their allocation in foreign assets," Shimamura said.