US Dollar slides against yen on BOJ easing skepticism
Frankfurt (Sept 7) The dollar traded mixed against major currencies on Wednesday, but fell markedly against the yen, on growing skepticism that the Bank of Japan may not be able to take aggressive easing measures at its policy meeting later this month.
The surge is adding to the yen’s ascent following surprisingly slow U.S. service sector growth data. The report reduced speculation that the Federal Reserve will raise interest rates in the near term.
The dollar USDJPY, -0.43% was recently at ¥101.55 after falling to as low as ¥101.24, the lowest level since Aug. 26, according to EBS. That compared with the dollar at ¥102.02 late Tuesday in New York.
The euro EURUSD, -0.0889% fell to $1.1250 from $1.1255.
The ICE Dollar Index DXY, -0.01% fell slightly to 94.85 after sliding 1.1% on Tuesday following the disappointing services figures.
The Bank of Japan is set to conduct a comprehensive review of its monetary policy later this month. Despite its aggressive efforts to generate inflation, a 2% inflation goal remains out of reach.
Some unorthodox measures, particularly the negative interest rate on excess bank reserves, have proven unpopular among the public. BOJ Governor Haruhiko Kuroda earlier this week discussed in some detail the potential damage to the economy from negative interest rates and a flattened yield curve.
Many market participants say there also is a practical limit on the big government bond purchase program.
A report in the Sankei business daily said Wednesday that the BOJ board is split on future policy direction, fueling skepticism over BOJ’s possible easing actions and helping trigger the yen’s spike across the board.
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“The yen is being bought against all other currencies, including the Swiss franc,” said Toshihiko Sakai, senior manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking Corp. Like Japanese yen, the Swiss franc CHFUSD, +0.0722% is considered as a safe-haven in times of economic uncertainty and tends to attract buying when doubts grow, for instance, over the U.S. economic outlook.
Elsewhere, investors were waiting for Bank of England Governor Mark Carney to appear in front of the U.K. Treasury Select Committee.
“No doubt there will be some robust exchanges, given that some MPs may feel the Bank overreacted, both in its warnings before the Brexit vote and also in the subsequent response,” Simon Smith, chief economist at FxPro in a note.
The pound GBPUSD, -0.5134% was trading at $1.3388. Sterling exchanged hands at $1.3440 late Tuesday in New York.
Source: MarketWatch
