NEW YORK: The yen soared 1 percent against the dollar and euro on Tuesday after the Bank of Japan said its open-ended commitment to buy assets would kick in only next year, disappointing those who had expected more aggressive monetary easing.
But the euro pared some losses against the yen and recovered versus the dollar after a German ZEW survey showed that economic sentiment was at its highest since May 2012.
Earlier the euro zone common currency had fallen to a session low against the dollar and yen on speculation that some large German banks could be asked to split their investment banking operations, driving European shares lower.
But the biggest mover was the yen, with the Bank of Japan once again falling short of expectations. The yen rose in the aftermath, even as some traders said the move higher would be limited.
There "are enough reasons not to be have been wholly convinced by the (Japanese) central bank actions and to want to take back some profit on the only trade that dominated forex this year selling the yen against almost anything," said Dean Popplewell, chief currency strategist at OANDA in Toronto.
Japan's central bank, which has been under intense political pressure to overcome deflation, doubled its inflation target to 2 percent as had been widely expected.
It also said it had decided to switch to an open-ended approach of buying a certain amount of assets each month next year, without setting a deadline for completing the purchases.
The dollar was down 1 percent against the yen at 88.70, earlier it had fallen past reported stops at 88.50 yen to hit a session low of 88.35.
Traders cited bids at 88.00-88.20 yen while chart support was at its Jan. 16 low. The dollar had risen to 90.06 yen immediately after the BOJ decision, not far from its 2-1/2-year high of 90.25 yen, but later retreated.
The yen's recovery was likely to be short-lived, and the dollar would rise against the yen in the coming months, analysts said.
"The general upward move in dollar/yen will continue due to expectations of more easing
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