Bank of Japan governor Haruhiko Kuroda said the central bank was not engaging in a currency war by adopting negative interest rates, stressing that the move was aimed at stimulating the economy through lower borrowing costs. “The yen benefited from the latest round of “risk off'”.
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The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.18 percent at 98.837 .DXY . The single currency rallied 1.7 percent against the dollar after U.S. Treasury yields slipped to 10-month lows in the wake of the Dudley comments and downbeat data.
“Recently, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy”, the BoJ said in a statement accompanying the decision. “By pushing down interest rates and the yield curve, we hope to push down real interest rates so that we can stimulate consumption and investment”. With many Japanese government bond yields now in negative territory, global FX reserve managers may shift some of their holdings into the dollar and away from the yen, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.
Analysts said risk aversion boosted the yen and euro.
Japan’s central bank’s negative interest rate can be lowered to as much as negative 1 percent, according to Masahiro Kawai, a professor at the University of Tokyo that has collaborated on research with Kuroda.
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The New Zealand dollar rose 0.5 percent to $0.6544, outperforming against the Australian dollar, which fell 0.3 percent against the United States dollar to $0.7015.
