* Dollar, euro initially drop vs. yen after BOJ, then push
to session highs
* Aussie dollar takes RBA in stride, rises to fresh
By Lisa Twaronite
TOKYO, Feb 18 The yen dropped against its major
counterparts on Tuesday, after the Bank of Japan held policy
steady as expected and extended a special lending program to
support the economy.
The BOJ maintained its upbeat economic assessment,
suggesting no further easing steps are on the near-term horizon.
The central bank also decided to extend three special loan
facilities by one year from their scheduled expiry at end March.
The extension was also expected, though some market participants
apparently viewed it as a policy signal of a more accommodative
"People just saw the news about the loans and jumped on the
bandwagon to buy back dollar/yen and cover their shorts after
its drop to session lows after the BOJ held steady," said a
director at a foreign exchange market research firm in Tokyo.
The dollar rose about 0.6 percent to 102.58 yen,
after dipping as low as 101.76 yen in the immediate wake of the
BOJ's announcement. It pulled further away from a nearly
two-week low of 101.37 yen hit in the previous session.
The euro also added about 0.7 percent on the day to 140.69
Against a basket of currencies, the dollar retook some lost
ground and steadied on the day. The dollar index fell as
low as 79.951 in the previous session, its lowest since late
last year, before ticking up to 80.156.
U.S. markets were closed on Monday for the Presidents Day
Market participants will be waiting to see if Governor
Haruhiko Kuroda maintains the stance he took last month -- that
no further easing was needed now with prices rising steadily and
overseas economies recovering -- or if he hints at any more
steps following disappointing growth data this week.
Kuroda will hold an embargoed news conference from 3:30 p.m.
(0630 GMT) with his comments expected to come out any time after
4:15 p.m. (0715 GMT).
Gross domestic product data released on Monday showed the
Japanese economy grew less than expected in the fourth quarter
as consumer spending, business investment and exports
disappointed, a worrying sign of waning momentum ahead of
April's planned increase in the national sales tax.
The Australian dollar was up about 0.3 percent at $0.9061
, after rising to a one-month high of $0.9079.
"Fundamentals aren't really driving it. It's quite clear
that what's going on is liquidation of U.S. dollar longs, as the
market rebalances," said Sue Trinh, senior currency strategist
at RBC Capital Markets in Hong Kong.
In minutes released on Tuesday of the Reserve Bank of
Australia' Feb. 4 meeting, when the RBA surprised some by
dropping its bias to ease further, the central bank noted that a
lower exchange rate would support growth.
The RBA said it saw signs policy stimulus was working to
spur economic activity and as a result it was prudent to keep
interest rates steady for a while.
The euro was up about 0.1 percent on the day at $1.3715
, not far from a high of $1.3723 touched on Monday, its
highest level since Jan. 24.
European Central Bank governing council member Ewald Nowotny
said on Monday that a negative deposit rate from the ECB may
fail to stimulate more lending and could have an adverse
The single currency was also helped by data on Friday
showing both Germany and France grew slightly faster than
expected in the fourth quarter.