September 19, 2012 / 3:05 PM / 8 years ago

FOREX-Yen gains broadly as BoJ eases more than expected

* BOJ increases asset purchases more than expected
    * Euro slips vs yen on profit-taking
    * U.S. housing data show budding signs of recovery
    * Spain deputy PM says still considering the terms of a

    By Julie Haviv
    NEW YORK, Sept 19 (Reuters) - The yen gained broadly on
Wednesday, erasing earlier losses incurred after the Bank of
Japan eased monetary policy more than expected, following in the
footsteps of recent aggressive action by other major central
    The yen initially fell to a one-month low against the dollar
as the BOJ's decision encouraged investors to take more risk,
nudging the euro higher against the dollar before it succumbed
to fresh profit-taking. Talk of a European central bank
diversifying out of the euro also weighed on the single
    The BOJ increased asset purchases by 10 trillion yen, almost
double what some had expected. This followed aggressive monetary
easing by the U.S. Federal Reserve and a European Central Bank
plan to buy unlimited amount of government bonds of indebted
euro zone states. 
    The timing of the BoJ's move was somewhat of a surprise
relative to market expectations, according to Vassili
Serebriakov, currency strategist at Wells Fargo in New York. 
    "The yen fell initially, but subsequently managed to recoup
most of these losses," he said. "Meanwhile, markets are
increasingly questioning the next European policy moves, and, in
particular, the possibility of Spanish government requesting
financial aid."
    Accommodative global monetary conditions are supportive for
most commodity and emerging currencies, he said.
    The dollar jumped to 79.21 yen, its highest since
Aug. 22, after the BOJ's decision. It last traded at 78.36 yen,
down 0.6 percent on the day. 
    Analysts said a repeat of the yen's sharp fall in
February-March in the wake of surprise easing by the BOJ was
unlikely as both the ECB and the Fed are viewed as having eased
more aggressively.
    "The real test for dollar/yen is whether the current move
can carry it above 80 yen," said Niels Christensen, currency
strategist at Nordea in Copenhagen. "I think it will run out of
steam as you need very good numbers out of the U.S. and risk
appetite to maintain pressure on the yen."
    BOJ Governor Masaaki Shirakawa said Japan's economic
recovery may be delayed by six months due to a prolonged
slowdown in global growth. 
     Risk aversion abated somewhat after U.S. housing data
showed the pace of U.S. home resales rose in August to its
fastest in over two years and groundbreaking on new homes also
climbed, hopeful signs that a budding housing market recovery is
gaining traction.          

     The euro erased earlier gains against the yen. The single
currency was last down 0.6 percent on the day at
102.16 yen, well below an earlier high of 103.63 yen.
    Against the dollar, the euro last traded at $1.3046,
nearly unchanged on the day. 
    Given that the euro had rallied some 9 percent since late
July, traders said the pullback reflected some mild
profit-taking as markets waited to see whether Spain would apply
for aid and trigger the ECB's bond-buying programme.
    While many market players expect Spain eventually to ask for
a bailout, some say investors' patience could be tested as
Madrid is likely to resist tough conditions which some northern
euro zone countries would want imposed in return for any aid.
    Spain's deputy prime minister, Soraya Saenz de Santamaria,
said on Tuesday the government was still considering the terms
of a bailout. 
    The euro was expected to remain broadly in favour, however,
as the ECB's plans to tackle the debt crisis have encouraged
investors to pare aggressive short positions.
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