Tuesday, 15 September 2015 17:42
LONDON: The yen rose on Tuesday after the Bank of Japan held off on expanding its stimulus programme, with Governor Haruhiko Kuroda maintaining his optimism about the country’s economic outlook.
The outcome was expected, but some market players had hoped for a surprise easing because of weak economic data over recent weeks. Kuroda gave no hints about any further easing, telling a press conference that Japan’s economy continued to recover moderately and that he expected exports to rise gradually.
The dollar fell 0.6 percent to 119.54 yen and the euro was down by a similar margin to trade at 135.20 yen.
Traders said the safe-haven yen was likely to be underpinned by any signs of stock markets faltering on worries about a US interest rate increase or a slowdown in China.
“Kuroda sounded surprisingly upbeat and that is why dollar/yen is edging higher,” said Alvin Tan, currency strategist at Societe Generale, London.
“But we still think the BOJ will have to opt for additional easing in the fourth quarter if they have to achieve their inflation target of 2 percent. In the short term, though, we will see dollar/yen chopping around in the 118.50-121.50 range ahead of the Fed meeting.”
The dollar index was flat at 95.201, having slipped to 94.913 on Monday, its lowest since late August, as traders wait to see whether the Federal Reserve will raise interest rates this week for the first time in almost a decade.
Volatility in financial markets since last month has led many investors to believe the Fed will leave rates unchanged to avoid adding to the instability. Markets are pricing in around a 30 percent chance of a rate hike.
The euro traded flat at $ 1.1305, having risen to $ 1.1373 on Monday, its highest since Aug. 26. It shrugged off a poor German ZEW survey that showed a slide in investor morale.
Sterling edged lower to trade at $ 1.5420, after data showed UK inflation subdued in August, tempering the case for a rate hike anytime soon.
Lack of inflation is the central argument against a rise in UK rates, but jobs and wage growth have been more positive, supporting a view that the BoE will follow the Fed in lifting rates in early 2016.
“Until inflation rises, it is premature to speculate about rate hikes,” said Esther Reichelt, currency strategist at Commerzbank. “One thing everyone agrees on: the BoE will wait for a Fed rate hike before taking action itself.”
