FOREX-Euro falls sharply, yen boosted as BOJ disappoints

Tue Jan 22, 2013 4:59am EST

Related Topics

* Yen rebounds as BOJ decision falls short of expectations
    * BOJ open-ended asset purchases to come into effect in 2014
    * BOJ doubles inflation target to 2 pct
    * Euro falls vs dollar, German ZEW at 1000 GMT in focus


    By Anooja Debnath
    LONDON, Jan 22 (Reuters) - The euro fell sharply against the
yen on Tuesday on speculation  that some large German banks
could be asked to split their investment banking operations,
causing European shares to lose ground.
    The yen was strong across the board after the Bank of Japan
said its open-ended commitment to buy assets would only kick in
next year, disappointing those who expected more aggressive
measures. 
    "The reasons for the move in the euro are due to the DAX
declining with German banks selling off," said Michael Sneyd, FX
strategist at BNP Paribas. "Moves like this reflect that
positioning in the euro is very vulnerable."
    The single currency fell 1.4 percent to 117.32 yen 
from a high of 120.18 yen touched after the BOJ's decision.
    The BOJ, 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.
    "There was some disappointment in markets that the BOJ would
start their open-ended bond purchases only in January 2014, so
we see some profit taking in dollar/yen," said Bernd Berg,
global FX strategist at Credit Suisse.
    The dollar also fell 1.0 percent against the yen to a
session low of 88.365 yen as investors rushed to lock in
profits after the BOJ decision. Traders said it fell past stops 
at 88.50 yen, with bids seen at 88.00-88.20 yen. Chartists said
support for dollar/yen was at 87.80 yen, its Jan. 16 low.
    The dollar slipped from 90.18 yen shortly after the meeting
and was some way off 90.25 yen, the 2-1/2 year high hit on
Monday. 
    Stop-loss selling added to the dollar's drop, said Jeffrey
Halley, FX trader for Saxo Capital Markets in Singapore."The BOJ
increase in asset purchases is only commencing in 2014. So no
strong immediate increase in easing," Halley said. 
   "This was combined with the whole street having dollar/yen
stops under 89.50 yen," he added. 

    EURO FALLS
    Against the dollar, the euro was down 0.1 percent to $1.3298
. While the euro has struggled to break above the $1.34
level since it hit a 10-month high of $1.3404 a week ago,
strategists said single was likely to remain firm as the
concerns around the euro zone crisis ease.
    After European Central Bank President Mario Draghi's
surprisingly upbeat press conference helped buoy the euro, the
Bundesbank lent further support to it on Monday after saying
Germany's economic slump had likely already bottomed out.
 
    Markets will be looking at the German ZEW economic sentiment
figures due 1000 GMT to reaffirm that Europe's largest economy
was  recovering. 
    "If we get an upwards surprise in the economic data out of
Germany then the euro could test the $1.34 level," Credit
Suisse's Berg said.
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