BOJ Announces Easing Programs
The Japanese yen fell Tuesday as the Bank of Japan announced monetary easing programs and kept rates at 0.1%. The BOJ made the decision during an emergency meeting will inject more liquidity into the Japanese financial system. The decision to hold three month finds at historic lows sparked a slight return of risk appetite putting pressure on both the yen and the US dollar. Stocks and commodities rose helping commodity linked currencies and more available information about Dubai’s debt problems helped to raise risk sentiment among investors. Stephen Gallo of Schneider FX in London stated, “The two primary funding currencies, the dollar and yen, are performing badly today versus non-quantitative easing currencies and higher-yielders. The moves by the BOJ caused a big shakeout of long yen positions, and a weaker yen has helped asset price movements elsewhere … as the weak yen to a degree — but maybe not as much as dollar — drives the risk trade.”
European Stocks Rise
The dollar vs. yen rose 0.6% to 86.90 yen after reaching 87.54 earlier in the trading session. The euro rose 1% against the yen to 130.90 yen and the Aussie and Kiwi dollars rose almost 2% against the yen. The euro rose 0.4% against the dollar trading at $1.5065 and European stocks rose 2% prompting increased risk appetite. The Aussie dollar rose almost 1% against the greenback after the Reserve Bank of Australia raised rates to 3.75%. The dollar traded at 84.82 yen late last week, the lowest since 1995 due to dollar interbank costs falling below yen interbank costs.
Strong Yen Hurting Japanese Exports
The yen’s strength has hurt exporters such as Sony and Toyota and the BOJ has said it will provide 10 trillion yen in three-month funds at a fixed rate of 0.1%. Adam Cole of RBC in London said, “The message is that the BOJ isn’t completely indifferent to currency rates, and this should at least be marginally yen- negative.” Despite the central bank’s move most experts believe that as long as US rates remain at near zero the yen will not weaken.
