MW: Yen climbs after Bank of Japan; dollar recovers
German yields fall under Japan’s, weighing on euro-yen
By Deborah Levine and Sarah Turner, MarketWatch
NEW YORK (MarketWatch) — The Japanese yen climbed against the dollar and other currencies on Tuesday after the Bank of Japan kept its key rate on hold and refrained from announcing more policy easing.
Renewed turmoil in Spanish and Italian bond markets also supported the yen and the U.S. dollar, both seen as safe havens and alternatives to assets deemed riskier.
The dollar USDJPY -0.6507% fell to 80.94 yen, compared with ÂĄ81.65 in late North American trading on Monday.
The euro EURJPY -0.9288% extended losses to 1.1% against the yen, to buy ÂĄ1065.83.
The Australian dollar AUDJPY -1.1700% fell 1.2% versus Japan’s currency while the New Zealand dollar NZDJPY -1.6996% dropped 1.6%.
The Japanese central bank Tuesday kept to its policy stance, stating that it will “encourage” the uncollateralized call rate to remain at around 0.0% to 0.1%.
While many economists had anticipated no policy changes, currency traders had priced in some possible adjustments.
The central bank noted that overseas economies were still decelerating but Europe has stopped deteriorating and financial markets were generally stable.
In Japan, economic activity showed some signs of picking up but remained “more or less flat,” the central bank added.
“Going into the meeting, there was at least a partial expectation of a further ratcheting up of the asset-purchase program and the yen is firmer as a result,” said Adam Cole, head of G10 FX strategy at RBC Capital Markets.
The U.S. dollar has gained 5.2% against the yen this year, according to FactSet data. February’s surprise inflation target and fresh asset-buying plan from the Bank of Japan are playing some part in that move.
Investors’ shifts in and out of safe havens and the improvement in the U.S. economy also play major roles.
“We expected the bank to ease by announcing additional Japanese government-bond purchases,” said Takuji Okubo, chief Japan economist at Societe Generale Corporate & Investment Banking, describing Tuesday’s decision as disappointing.
“Today an increase in the size of asset purchases may have been sufficient to satisfy the market. However, by the time [the] BoJ meets on April 27, expectations for a monetary easing will likely grow so that a much bolder measure may be needed to engineer a positive surprise,” the economist added.
