European Central Bank, Bank of England leave policy on hold
By Polya Lesova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar rallied against the yen on Thursday after the Bank of Japan announced a massive easing program aimed at ending deflation in the Japanese economy.
The dollar USDJPY +2.9931% shot up to 95.70 Japanese yen Thursday, from ¥92.90 just ahead of the decision. It traded around ¥92.78 in late North American trade on Wednesday.
In the first policy meeting under Gov. Haruhiko Kuroda, who has pledged to fight long-running deflation in Japan, the central bank vowed to achieve a 2% inflation target in two years. It also delivered a radical overhaul of policy with a new base money target and a sharp increase in asset buying.
The central bank said it would increase its Japanese government bond holdings at an annual pace of ¥50 trillion ($530 billion), with JGB holdings to double in two years. It will also terminate its asset-buying program.
“A first glance at the market reaction confirms that the BoJ delivered at least what the market had hoped for: dollar/yen higher and Nikkei gaining after the announcement,” said analysts at Danske Bank in a note. The Nikkei Stock Average JP:NIK +2.20% rallied 2.2%.
The ICE dollar index DXY +0.41% , which measures the U.S. currency against a basket of six major rivals, climbed to 83.322, up from 82.712 in late Wednesday in North America.
The WSJ Dollar Index XX:BUXX +0.61% , which measures the currency against a wider basket, rose to 73.95 from 73.22 late Wednesday.
Central-bank meetings in Europe were also in the spotlight. The Bank of England left the size of its bond-buying program unchanged and held its key lending rate at a record low 0.5%, as expected. The British pound GBPUSD +0.2867% slipped to $1.5115 from $1.5148 late Wednesday.
The European Central Bank also kept monetary policy unchanged.
ECB President Mario Draghi told reporters in his monthly news conference that the central bank would closely watch incoming data and assess the risks to the bank’s target for annual inflation of near but just below 2%.
“In a nutshell, a rate cut or additional non-standard measures cannot be ruled out in May,” said Annalisa Piazza, strategist at brokerage Newedge in London. Annual inflation in the euro zone dropped to 1.7% in March.
The euro remained under pressure as Draghi spoke and in the wake of an unexpected rise in U.S. weekly jobless claims. The euro EURUSD +0.1537% traded at $1.2790 in recent action, down from $1.2845 in North American trade late Wednesday.
Polya Lesova is MarketWatch's New York deputy bureau chief. Follow her on Twitter @PolyaLesova.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
