US Dollar plunges against yen after Bank of Japan’s surprise easing move
Frankfurt (Dec 18) The dollar fell sharply against the yen on Friday as investors ultimately expressed disappointment in additional easing measures by the Bank of Japan, with the expectation that more must be done.
The dollar USDJPY, -0.97% was whiplashed, shooting up to ¥123.59 shortly after the central bank unveiled supplementary measures for its quantitative easing program, including a new program to buy exchange-traded stock funds and a lengthening of the average maturities on bonds the bank buys.
The dollar had edged up ahead of the decision to ¥122.60 as the longer-than-expected meeting generated speculation of a surprise in the works.
Investors scrambled to buy the dollar as their initial reaction, given that most economists and market participants had expected no change in policy.
But as investors paused to take a reality check of the actual extent of the measures, their initial enthusiasm appeared to turn into disappointment as they opted to offload the dollar, quickly sending the greenback into a tailspin. The U.S. currency was last trading hands at ¥121.38 compared to ¥122.70 late Thursday in New York.
“We were so surprised at first,” said Akira Moroga, manager of forex products group at Aozora Bank. “But the release says these are just supplementary measures and it looks there was no intention for this to be an additional easing.”
“We were so surprised at first. But the release says these are just supplementary measures and it looks there was no intention for this to be an additional easing.”
While the bank tweaked the average remaining maturity of the Japanese government bonds it purchases, it left the overall target of annual asset purchases unchanged at around ¥80 trillion ($650 billion).
The additional purchases of exchange-traded equity funds, in addition to the portion it has purchased annually since late 2014, amount to only about 10% of the size of the current ETF buying. Initial stock-market enthusiasm quickly turned sour with the Nikkei Stock Average NIK, -1.90% falling well into negative territory during the afternoon session.
Coming in the wake of the Federal Reserve’s decision to raise rates in the U.S., any move in the opposite direction was likely to produce a sharp response initially.
The WSJ Dollar Index BUXX, -0.27% a measure of the dollar against a basket of major currencies, was down 0.3% at 90.44.
The U.S. currency also extended its earlier gains against the euro EURUSD, +0.1016% which fell to $1.0823 from $1.0818 late Thursday. The common currency EURJPY, -0.88% was at ¥131.33, compared with ¥132.76 late Thursday.
Source: MarketWatch
