* Dollar/yen hits highest since August 2009
* BOJ pledges to pump $1.4 trillion into economy
* Aussie dollar at 4-1/2 year highs against yen
By Sophie Knight
TOKYO, April 5 The yen slumped to a 3-1/2 year
low versus the dollar on Friday, after suffering its biggest
fall since late 2008 on Thursday, when the Bank of Japan
surprised markets with a radical campaign of monetary expansion
to attack deflation.
The dollar extended its gains against the yen and rose to as
high as 97.06 yen on trading platform EBS, a level not seen
since August 2009. The dollar last stood at 96.88 yen, up
0.6 percent on the day.
The greenback soared 3.6 percent against the yen on Thursday
after the BOJ unleashed the intense monetary stimulus,
promising to inject about $1.4 trillion into the economy in less
than two years, a gamble that sent bond yields to record lows as
prices rose on the prospect of massive BOJ
Governor Haruhiko Kuroda, chairing his first policy meeting,
committed the BOJ to open-ended asset buying and said the
monetary base would nearly double to 270 trillion yen ($2.9
trillion) by the end of 2014.
"The BOJ announcement was more aggressive than almost
anybody had expected," said Jens Nordvig, global head of FX
strategy at Nomura Securities in New York.
The euro also continued its rally against yen, hitting a
three-week high of 125.50 yen. The euro was last up 0.5 percent
at 125.295 yen, after jumping 4.3 percent on
Thursday, its biggest one-day rise against the yen since
Nomura Securities said that weaker U.S. growth momentum
lately meant the dollar may not be the best currency to express
Instead, the firm said it is buying the Australian dollar
against the yen, targeting a move to 105 in two to three months.
The Aussie dollar rose to 101.04 yen, its highest
level since August 2008.
"The BOJ made a strong commitment to the 2 percent inflation
target and so I think foreign investors' expectations rose,
which helped the yen weaken," said Junya Tanase, executive
director of FX research at JPMorgan in Tokyo.
The anticipation of long-dated Japanese government bond
purchases has already caused the Japanese yield curve to
The BOJ's new plan means it will buy about 7 trillion yen
($73 billion) of bonds per month, equivalent to about 1.4
percent of gross domestic product. By comparison, the U.S.
Federal Reserve is buying $85 billion of bonds per month, about
0.6 percent the size of the economy.
"However, I don't think that the achievement of that
inflation target has actually been priced in," Tanase added.
Analysts say that the dollar has space to run higher against
the yen now that it has regained a foothold above the 96 yen
Barclays foresees the dollar firming to 103 yen in the
coming weeks, while Societe Generale sees that level as a
long-term target that should be reached by the first quarter of
The yen could firm in the near term if the U.S. nonfarm
payrolls report, due out later on Friday, disappoints. That
could keep U.S. bond yields depressed and add to expectations of
more bond-buying from the Federal Reserve, which would weigh on
the dollar against the yen.
Data showing weaker-than-expected growth in U.S.
private-sector employment and initial jobless claims at
four-month highs last week has fueled worries the labor market
is losing momentum.
The euro was flat against the dollar at $1.2933. The
euro has rebounded versus the dollar after hitting a 4-1/2 month
low around $1.2745 on Thursday, as investors pared back their
bearish bets against the single currency.
European Central Bank President Mario Draghi said on
Thursday the bank stood ready to act if growth continues to
languish. He also affirmed his commitment to keeping the euro
zone intact and said the Cyprus bailout was not a "template" for
future rescues in the currency zone.