Wednesday, September 19, 2012

FOREX-Yen gains broadly as BoJ eases more than expected - Reuters

Wed Sep 19, 2012 11:02am EDT

  * BOJ increases asset purchases more than expected      * Euro slips vs yen on profit-taking      * U.S. housing data show budding signs of recovery      * Spain deputy PM says still considering the terms of a  bailout        By Julie Haviv      NEW YORK, Sept 19 (Reuters) - The yen gained broadly on  Wednesday, erasing earlier losses incurred after the Bank of  Japan eased monetary policy more than expected, following in the  footsteps of recent aggressive action by other major central  banks.      The yen initially fell to a one-month low against the dollar  as the BOJ's decision encouraged investors to take more risk,  nudging the euro higher against the dollar before it succumbed  to fresh profit-taking. Talk of a European central bank  diversifying out of the euro also weighed on the single  currency.      The BOJ increased asset purchases by 10 trillion yen, almost  double what some had expected. This followed aggressive monetary  easing by the U.S. Federal Reserve and a European Central Bank  plan to buy unlimited amount of government bonds of indebted  euro zone states.       The timing of the BoJ's move was somewhat of a surprise  relative to market expectations, according to Vassili  Serebriakov, currency strategist at Wells Fargo in New York.       "The yen fell initially, but subsequently managed to recoup  most of these losses," he said. "Meanwhile, markets are  increasingly questioning the next European policy moves, and, in  particular, the possibility of Spanish government requesting  financial aid."      Accommodative global monetary conditions are supportive for  most commodity and emerging currencies, he said.      The dollar jumped to 79.21 yen, its highest since  Aug. 22, after the BOJ's decision. It last traded at 78.36 yen,  down 0.6 percent on the day.       Analysts said a repeat of the yen's sharp fall in  February-March in the wake of surprise easing by the BOJ was  unlikely as both the ECB and the Fed are viewed as having eased  more aggressively.      "The real test for dollar/yen is whether the current move  can carry it above 80 yen," said Niels Christensen, currency  strategist at Nordea in Copenhagen. "I think it will run out of  steam as you need very good numbers out of the U.S. and risk  appetite to maintain pressure on the yen."      BOJ Governor Masaaki Shirakawa said Japan's economic  recovery may be delayed by six months due to a prolonged  slowdown in global growth.        Risk aversion abated somewhat after U.S. housing data  showed the pace of U.S. home resales rose in August to its  fastest in over two years and groundbreaking on new homes also  climbed, hopeful signs that a budding housing market recovery is  gaining traction.                   EURO SLIPS       The euro erased earlier gains against the yen. The single  currency was last down 0.6 percent on the day at  102.16 yen, well below an earlier high of 103.63 yen.      Against the dollar, the euro last traded at $1.3046,  nearly unchanged on the day.       Given that the euro had rallied some 9 percent since late  July, traders said the pullback reflected some mild  profit-taking as markets waited to see whether Spain would apply  for aid and trigger the ECB's bond-buying programme.      While many market players expect Spain eventually to ask for  a bailout, some say investors' patience could be tested as  Madrid is likely to resist tough conditions which some northern  euro zone countries would want imposed in return for any aid.      Spain's deputy prime minister, Soraya Saenz de Santamaria,  said on Tuesday the government was still considering the terms  of a bailout.       The euro was expected to remain broadly in favour, however,  as the ECB's plans to tackle the debt crisis have encouraged  investors to pare aggressive short positions.  

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