MW: Dollar falls against yen after Bank of Japan leaves policy unchanged
The dollar was lower against the yen in Asia trade, following the Bank of Japan’s widely expected decision to stand pat after its two-day policy meeting ended earlier Tuesday.
The U.S. currency USDJPY, -0.83% fell to ¥113.05, weaker than ¥113.79 late Monday in New York.
The BOJ left its monetary policy unchanged Tuesday even as it slightly downgraded its view of the economy. The BOJ will keep the rate on some commercial banks’ reserves at minus 0.1%, its nine-member policy board said. Seven policy board members voted for the measure and two against, according to a statement. The board also voted 8-1 to leave the central bank’s asset-purchase program, previously its primary policy tool, unchanged at Y80 trillion ($705 billion) a year.
“It was almost in line with expectations,” said Minori Uchida, head of Tokyo global research at Bank of Tokyo-Mitsubishi UFJ.
But the central bank’s decision pushed the benchmark Nikkei Stock Average lower NIK, -0.68% , which prompted buying in the yen, considered a safe haven. The Nikkei index was down 0.6% in late trading.
The BOJ’s decision was widely expected after it surprised the markets with the introduction of the nation’s first ever negative interest rates policy last month.
But the currency market remained volatile ahead of the decision Tuesday. Before the midday break in Tokyo, the dollar fluctuated widely, in a sign of how short-term players were taking speculative positions ahead of the policy decision.
Read: U.S. dollar poised to gain 10% or better, even if Fed holds on rates
Investors are now shifting their focus to BOJ Gov. Haruhiko Kuroda’s press conference at 06:30 GMT.
“There are deep rooted expectations that the BOJ will ease further in April,” said Takuya Kanda, senior researcher at Gaitame.Com Research Institute. “Whether Gov. Kuroda can take effective control of such expectations is in focus.”
Uchida at the Bank of Tokyo-Mitsubishi UFJ said the dollar will likely remain steady unless Mr. Kuroda’s comments are unusually hawkish. But the dollar may come under selling pressure against the yen, as purchases of the Japanese currency rise ahead of the fiscal year end on March 31. Demand for the yen increases as Japanese companies repatriate profits and investment returns earned outside Japan before their book closing.
“I think the dollar will likely stay around ¥113.00” until the U.S. Federal Reserve concludes its two-day policy meeting Wednesday, said Uchida. Most investors expect the Fed to keep rates unchanged, but will dissect the central bank’s comments for clues on its plans for interest rates for the rest of the year.
In other currency trade pairs, the dollar was almost unchanged against the euro EURUSD, -0.0540% which was at $1.1111 from $1.1104 late Monday. Against the yen EURJPY, -0.88% the common currency was at ¥125.69 from ¥126.35.
The WSJ Dollar Index BUXX, +0.18% a measure of the dollar against a basket of major currencies, was up 0.02% at 88.31.
