January 22, 2013 / 2:45 PM / in 5 years

FOREX-Yen climbs vs dollar, euro as BOJ action disappoints

* Yen rebounds as BOJ decision disappoints
    * BOJ open-ended asset purchases to come into effect in 2014
    * BOJ doubles inflation target to 2 percent
    * Euro up vs dollar after surprise German ZEW jump

    NEW YORK, Jan 22 (Reuters) - The yen rose 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 expected more aggressive monetary
    The euro pared sharp losses against the yen and
was last little changed against the dollar after a German
ZEW survey showed that economic sentiment was at its highest
since May 2012. 
    Earlier the single 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
    "The BOJ, despite embarking on its boldest policy easing
scheme to date, disappointed market participants by postponing
action until 2014," said Omer Esiner, chief market analyst, at
Commonwealth Foreign Exchange in Washington. "But the medium
trend lower for the yen remains intact."    
    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 0.8 percent against the yen at 88.88
. Earlier it had fallen past reported stops at 88.50 yen
to hit a session low of 88.35 yen. 
    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$3.4 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 0.9 percent on the day at 118.26 yen,
though off a session low of 117.31 yen. The euro was hurt againt
the yen by a German newspaper report saying Germany's regulator
had ordered large banks to simulate a break-up. 
    Against the dollar, the euro was little changed at $1.3307
    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 Commonwealth Foreign Exchange's Esiner cautioned that
failing to breach $1.34 may mean a near term top is in place for
the single currency. 
   After European Central Bank President Mario Draghi's
surprisingly upbeat press conference this month helped buoy the
euro, the Bundesbank lent further support to the currency on
Monday, saying Germany's economic slump had probably already
bottomed out. 
    That is likely to see currency speculators and long-term
investors build bets in favour of the single currency in coming
week, traders said.
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