* Yen rebounds as BOJ decision disappoints
* BOJ open-ended asset purchases to come into effect in 2014
* BOJ doubles inflation target to 2 percent
NEW YORK, Jan 22 The yen climbed to a three-day
high against the dollar 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
The euro pared sharp losses against the yen and the dollar
after a German ZEW survey showed that economic sentiment was at
its highest since May 2012.
Earlier the euro zone 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
There "are enough reasons not to be have been wholly
convinced by the (Japanese) central bank actions and to want to
take back some profit on the only trade that dominated forex
this year - selling the yen against almost anything," said Dean
Popplewell, chief currency strategist at OANDA in Toronto.
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 1.1 percent against the yen at 88.56
. 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 its 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.
Some US$3.73 billion in yen changed hands through the global
session on Tuesday, using Reuters Dealing data.
The yen's recovery was likely to be short-lived, and the
dollar would rise against the yen in the coming months, analysts
"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.
The euro was down 1.3 percent on the day at 117.78 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 down 0.1 percent at $1.3300
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
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.