September 19, 2012 / 8:01 PM / 7 years ago

FOREX-Yen rises broadly; BoJ eases but not as aggressively

* BOJ increases asset purchases more than expected
    * Euro slips vs yen, gains vs dollar
    * U.S. housing data shows signs of recovery

    NEW YORK, Sept 19 (Reuters) - The Japanese yen gained across
the board on Wednesday, recovering from earlier losses incurred
after the Bank of Japan eased monetary policy more than
expected, as investors saw the announcement as less aggressive
than plans by other central banks.
    The yen initially fell to a one-month low against the U.S.
dollar as the BOJ's decision, following in the footsteps of
recent action by other major central banks, encouraged investors
to take on more risk, also pushing the euro higher against the
    But the yen recovered as investors looked at the BoJ
announcement against events and risk elsewhere in the world.
    The BOJ increased asset purchases by 10 trillion yen ($127
billion), almost double what some had expected, but it was
perceived as not as aggressive as central banks elsewhere as
investors debated the announcement. 
    The Federal Reserve made an open-ended pledge last week to
buy U.S. mortgage-backed securities until the job market in the
world's largest economy improves substantially. Meanwhile, the
European Central Bank plans to buy "unlimited" amount of
government bonds of indebted euro zone states.
    "First the European Central Bank, then the Federal Reserve
and now the Bank of Japan: all are implementing massive easing
policies to try to help their respective economic jurisdictions
recover," said Christopher Vecchio, Currency Analyst at DailyFX.
    "But there is one main difference: the ECB's and the Fed's
plans are unlimited in nature, with the Fed's likely to be more
effective at depreciating the U.S. dollar given the unsterilized
nature of the program, while the BoJ's is capped at a paltry 10
trillion yen," he added.
    After the BOJ decision, the dollar initially jumped to 79.21
yen, its highest since Aug. 22. But it last traded at
78.33 yen, down 0.6 percent on the day.
    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 the Spanish government requesting
financial aid."
    Accommodative global monetary conditions are supportive for
most commodity and emerging currencies, Serebriakov noted.
    A repeat of the yen's sharp fall in February-March in the
wake of surprise easing by the BOJ was seen as unlikely as
analysts said 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."
    The yen was up 0.5 percent against the Canadian dollar
 and the Swiss franc, and 0.7 percent
against the pound.
    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 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

    The euro erased earlier gains against the yen. The single
currency was last down 0.5 percent on the day at
102.30 yen, well below an earlier high of 103.63 yen.
    Against the dollar, the euro last traded at $1.3056,
up 0.1 percent on the day.
    Given that the euro had rallied some 9 percent since late
July, traders said the pullback reflected some caution as
markets wait to see whether Spain would apply for aid and
trigger the ECB's bond-buying program.
    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 favor, however,
as the ECB's plans to tackle the debt crisis have encouraged
investors to pare aggressive short positions.
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