Yen keeps its distance from one-month low

File picture: Shohei Miyano

File picture: Shohei Miyano

Published Sep 6, 2016

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Tokyo - The yen kept some distance from a one-month low against the dollar on Tuesday after Bank of Japan Governor Haruhiko Kuroda held back from signalling further easing, acknowledging instead the costs of the BOJ's aggressive stimulus.

The Australian dollar gained 0.5 percent after news Australia's current deficit was smaller than expected in April-June, ahead of the policy announcement from the Reserve Bank of Australia later in the day.

The US dollar is stabilising for now at around 103.45 yen, having fallen nearly a full yen from Friday's one-month high of 104.32.

Though Kuroda signalled his readiness to expand an already massive stimulus programme in his speech on Monday, he did not provide any explicit hints on the chances of the BOJ aggressively easing policy at its next review on September 20-21.

In addition, many analysts noted that Kuroda admitted for the first time that his stimulus drive has its costs, even though he disputed the view that the BOJ's stimulus is reaching its practical limit.

“For those who had been believing in a Kuroda who stresses only the benefits of easing, the speech would have been disappointing,” said Makoto Noji, senior strategist at SMBC Nikko Securities.

“To be sure, he is unlikely to change his policy framework given that he was preaching the benefit of stimulus. Yet many market players might have felt that the costs are likely to outweigh the benefits in the future,” he added.

The yen bounced back against the euro, which fell to 115.42 yen from Friday's one-month high of 116.37 yen .

The common currency was little moved against the dollar, staying at $1.1147.

The British pound maintained its firm tone, following surprising resilience in recent UK economic data, trading at $1.3305 in Asia after having hit a seven-week high of $1.3376 on Monday.

The Australian dollar rose 0.6 percent to $0.7623, hitting its highest level since August 26, maintaining its recovery trend from last week's one-month low of $0.7490.

The Aussie now braces for a decision later in the day from the Australian central bank's policy meeting at 2.30pm local time (04h30 GMT).

The Reserve Bank of Australia is expected to keep interest rates on hold at the meeting, the last to be chaired by long-standing governor Glenn Stevens before he retires this month.

“The Aussie could rise a bit if the RBA refrains from a rate cut as expected. But given many market players think its next rate cut will come in November at the earliest - after the next CPI data anyway - the impact may not be so large, mostly driven by algo-type trading,” said Yukio Ishizuki, currency strategist at Daiwa Securities.

REUTERS

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