SINGAPORE, Jan 22 – The yen briefly fell against the dollar today after the Bank of Japan surprised markets by adopting an open-ended commitment to buy assets, but later regained ground as the new scheme for additional purchases only comes into effect next year.
The BOJ, which has been under intense political pressure to overcome deflation, also doubled its inflation target to 2 per cent as had been widely expected.
The dollar rose to as high as ¥90.18 (RM3.069) right after the BOJ’s decision, nearing a 2-1/2 year high of ¥90.25 that had been set yesterday.
The greenback, however, later sagged back down and last fetched ¥89.19, down 0.5 per cent on the day.
The BOJ met expectations by setting a 2 per cent inflation target and delivered a surprise by adopting the open-ended pledge to buy assets, said Roy Teo, FX strategist for ABN AMRO Bank in Singapore.
Still, one point to note is that asset buying under the open-ended pledge is only set to start from next year, he said.
“From 2014 onwards it’s positive... From now until then they are not doing anything more aggressive to weaken the yen,” Teo said.
Stop-loss selling added to the dollar’s drop, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.
“The BOJ increase in asset purchases is only commencing in 2014. So no strong immediate increase in easing,” Halley said.
“This was combined with the whole street having dollar/yen stops under ¥89.50,” he added.
The euro rose to as high as ¥120.18 after the BOJ’s decision, but last stood at ¥118.75, down 0.6 per cent on the day. – Reuters
Asset buying under the open-ended pledge is only set to start from next year. – Reuters pic