TOKYO: The yen fell to one-month low on Wednesday after the Bank of Japan eased policy further, stepping up its asset purchase by a bigger-than-expected 10 trillion yen.
The euro hovered below a four-month high hit on Monday as euphoria over easing steps by the European Central Bank and the US Federal Reserve gave way to frustration over Spain's apparent reluctance to apply for financial aid.
The dollar jumped to as high as 79.10 yen, its highest level since Aug 22, from around 78.65 yen following the BOJ's decision. For more details on the move, see.
The currency is now within striking distance from the Ichimoku cloud top at 79.265, a break of which would be a major bull signal for the dollar.
"The market's prior expectations were that the BOJ would increase asset purchases by five trillion yen at most so there was a bit of surprise," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
The BOJ said it would extend its period to December next year from the current June deadline, while increasing the pace of its buying in bonds and bills next year.
"Following monetary steps taken by the European Central Bank and the US Fed earlier this month, today's action by the BOJ will help boost risk sentiment," said Masafumi Yamamoto, chief FX strategist at Barclays.
The euro stood at $1.3068, up slightly on the day but still off a four-month high around $1.3173 set on Monday when markets were still punishing the dollar following the Fed's debt-buying announcement.
Given that the euro had rallied some 9 percent since late July, traders said the pullback reflected some mild profit-taking as markets waited for Spain to apply for aid and trigger the European Central Bank's own bond-buying programme.
That could take more time than some impatient investors could tolerate, as Madrid is likely to resist tough conditions which northern euro zone countries want imposed in return for any aid, possibly putting pressure on the euro, some traders said.
"We are already in a phase to see political battle over the terms of the aid, which could lead to brinkmanship. The markets' optimism will be tested," said a trader at a Japanese bank.
Spain's deputy prime minister, Soraya Saenz de Santamaria, said on Tuesday the government was still considering the terms of a European bailout.
The Aussie fell prey to a bit of position adjustment as well, following its run-up to a six month high of $1.0625 on Friday, though pared some of losses after the BoJ's easing. It last stood at $1.0451, flat on the day.
Comments
Comments are closed for this article.