Dollar falls versus Yen after BOJ Inaction

The dollar fell against the yen in Asia on Thursday, after the Bank of Japan left policy unchanged, disappointing some investors who saw a remote chance of additional easing action that would have strengthened the dollar.

New Zealand’s central bank also stood pat on policy, prompting a fall in the New Zealand dollar.

The U.S. dollar USDJPY, -0.07%  was at ¥118.66, compared with ¥119.05 late Wednesday in New York.

The greenback had continued its weak tone overnight against the Japanese currency, after a lackluster U.S. growth reading clouded the likely timing of a Federal Reserve rate increase.

The BOJ decision also hastened a fall in Japanese stocks, pushing down the Nikkei Stock Average NIK, -2.69% by 2.5% and encouraging further moves into the safe-haven yen.

U.S. stocks, hit Wednesday by signs of slowing growth, held onto their losses after the Fed signaled that interest-rate increases are still possible in the coming months. Starwood said it hired investment bank Lazard to explore strategic alternatives.

Speculation had been smoldering among some investors expecting a surprise easing decision reminiscent of the BOJ’s move in late October. That easing decision pushed the dollar to ¥112.47 from ¥109.22.

But as widely expected, the central bank left its policy unchanged Thursday, sticking to the view that Japan is still on track to achieve 2% inflation despite stagnating price growth and the lingering speculation that further action is needed.

The central bank decided to keep its annual asset purchases at ¥80 trillion ($672.2 billion), ignoring a call from an influential lawmaker urging the bank to increase its purchases to ¥90 trillion.

The BOJ decision prompted the dollar to fall to as low as ¥118.54 midday.

But “we don’t see much big impact,” from such a selling, said Minori Uchida head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.

Given a combination of selling tied to the BOJ decision, the stock market weakness and the dollar’s broad slide overnight, “there are investors who, looking at it the other way round, see resilience in the dollar given that it has stayed above ¥118,” Uchida said.

Investors are now shifting their attention to BOJ Gov. Haruhiko Kuroda’s press conference scheduled for around 6:30 p.m. GMT.

After falling to a nearly two-month low of US$1.1188 overnight, the euro EURUSD, +0.54%  was at US$1.1107 from US$1.1129. The common currency EURJPY, +0.49%  was at ¥131.78 from ¥132.49.

Among other currency pairs, the New Zealand dollar softened after the Reserve Bank of New Zealand’s decision to keep rates on hold. The Kiwi USDNZD, +0.64%  fell to NZDJPY, -1.02%   $0.7594 and to ¥90.43, respectively, from US$0.7687 and ¥91.44 before the announcement.

Reserve Bank Gov. Graeme Wheeler said in a statement that the New Zealand dollar continues to be unjustifiably high and unsustainable in terms of New Zealand’s long-term economic fundamentals.

The WSJ Dollar Index BUXX, -0.06% a measure of the dollar against a basket of major currencies, was up 0.2% to 85.41.

Source: Market Watch