Homebuilders had slumped Tuesday after the US government said construction of new homes slowed down in August. The S&P BSE Sensex has risen over 6,000 points since March to hit its fresh 18-month high of 29,077 on September 8. Late Tuesday in NY, the shared currency bought from ¥113.43. The yen meanwhile slipped against the dollar.
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While the yen moved wildly before and after the news, it appeared to be settling a bit lower against most traded currencies including the United States and Australian dollars. Ditching its emphasis on buying 7 to 12-year bonds could mean the BOJ spends more on shorter-dated paper, increasing the difference between shorter-and longer-dated yields. The yen has since pared some of those losses.
The BOJ said it will maintain the new framework until its 2 percent inflation target is achieved in a stable fashion.
The Bank of Japan’s statement drove traders back to the greenback ahead of the results of the Fed’s latest policy meeting on Thursday morning New Zealand time.
The benchmark Nikkei, which had been in negative territory earlier in the day, jumped after the announcement, closing up 1.9% with bank stocks leading the gains.
Asian shares meandered Wednesday as markets awaited the outcomes of monetary policy meetings in the US and Japan.
The surprise announcement caused volatile trading as investors scratched their heads to grasp where and how the BOJ will try to control yields, and if controlling the $10 trillion market is possible at all.
“Risk markets have been accustomed to more policy easing over the summer and the realization is gradually sinking in that may not be the case going into the year-end”, said Karine Hirn, a partner at East Capital in Hong Kong.
Underscoring warnings Japan’s policies were doing little for the world’s third biggest economy or the rest of the world, exports slumped 9.6 per cent in August and imports plunged 17 per cent.
“If you take the time to read through these measures, then the impression is of a central bank that has largely lost the monetary plot and is undertaking an ever more complicated and convoluted approach to monetary policy”, said Simon Smith, chief economist at FxPro in London.
Investors’ focus now shifts to the U.S. Federal Reserve policy decision later on Wednesday.
Most experts are pencilling in a rate hike by December if data flow is good.
“That’s is the political issue the government needs to tackle through structural reform and goes outside the reach of Gov. Kuroda”, said Ishikawa, who added that Prime Minister Shinzo Abe needs to push pro-growth policies to revive such sectors as the medical and agricultural fields. The euro was nearly flat at $1.1154.
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The ICE U.S. Dollar Index, a gauge of the buck’s strength against a half a dozen rivals, was flat around 96.021.
