FOREX-Yen rises against dollar, euro after BoJ disappoints

Tue Jan 22, 2013 4:17pm EST

* Yen rebounds as BOJ decision disappoints
    * BoJ open-ended asset purchases to take effect in 2014
    * BoJ doubles inflation target to 2 percent


    NEW YORK, Jan 22 (Reuters) - The yen soared 1 percent
against the dollar and euro on Tuesday after the Bank of Japan
said its open-ended commitment to buy assets would kick in only
next year, disappointing those who had expected more aggressive
monetary easing.
    But the euro pared some losses against the yen and recovered
versus the dollar after a German ZEW survey showed that economic
sentiment was at the highest since May 2012. 
    The common currency had fallen to a session low against the
dollar and yen on speculation that some large German banks could
be asked to split their investment banking operations, driving
European shares lower.
    But the biggest mover was the yen, with the Bank of Japan
once again falling short of expectations. The yen rose in the
aftermath, even as some traders said the move higher would be
limited.  
    "A dominate yen outshined its rivals after actions by the
Bank of Japan were considered by many to be underwhelming and
disappointing," said Joe Manimbo, senior market analyst at
Western Union Business Solutions in Washington.
    Japan's central bank, which has been under intense political
pressure to overcome deflation, doubled its inflation target to
2 percent, as had been widely expected. 
    It also said it had decided to switch to an open-ended
approach of buying a certain amount of assets each month next
year, without setting a deadline for completing the purchases. 
    The dollar was down 0.9 percent against the yen at 88.74
. Earlier, it had fallen past reported stops at 88.50 yen
to hit a session low of 88.35. 
    Traders cited bids at 88.00-88.20 yen while chart support
was at the Jan. 16 low. The dollar had risen to 90.06 yen
immediately after the BOJ decision, not far from its 2-1/2-year
high of 90.25 yen, but later retreated.
    The yen's recovery was likely to be short-lived and the
dollar would rise against the yen in the coming months, analysts
said.  
    "The general upward move in dollar/yen will continue due to
expectations of more easing after a new BoJ governor is
appointed in April," said Bernd Berg, global FX strategist at
Credit Suisse, adding that the dollar could rise to 92 yen in
the next few months. 
    Current BoJ Governor Masaaki Shirakawa's term ends in April
and markets are positioned for further yen weakness as most
expect him to be replaced by someone whose stance on aggressive
policy easing matches that of Prime Minister Shinzo Abe's.
    
    EURO RECOVERS
    The euro was down 1 percent on the day at 118.16 yen
, though off a session low of 117.31. The euro was hurt
against the yen by a German newspaper report saying Germany's
regulator had ordered large banks to simulate a break-up.
 
    A report showing U.S. home resales unexpectedly fell in
December added to volatility and pressure on the euro and
dollar, though the data was not seen as enough to derail the
boost housing will likely provide to the economy this year.
.   
    Against the dollar, the euro was little changed at $1.3317
.
    While the euro has struggled to break above the $1.34 level
since it hit a near 10-month high a week ago, strategists said
it was likely to remain firm as concerns around the euro zone
crisis ease.
    The German ZEW figures beat all expectations, a sign that
the euro zone crisis was no longer hitting Europe's largest
economy as hard as it was last year. 
    "The euro can cross the $1.34 mark to reach $1.35 as early
as the end of this week if data out of Germany continues to be
strong," said Joerg Angele, FX strategist at Raiffeisen Bank
International in London. 
    But Omer Esiner, chief market analyst at Commonwealth
Foreign Exchange in Washington, cautioned that failing to breach
$1.34 may mean a near term-top is in place for the euro.
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