Yen Slides As BoJ Easing Fuels Risk-appetite

Yen Slides As BoJ Easing Fuels Risk-appetite


The Japanese yen edged sharply lower in Asian deals Wednesday as the the Bank of Japan embarked on a powerful monetary easing by expanding the total size of the asset purchase program by about JPY 10 trillion and extending the asset purchase deadline by six months.
The total size of the program was lifted to JPY 80 trillion, which corresponds to additional purchases of Japanese government bonds and treasury discount bills by JPY 5 trillion each. The asset purchase target now stands at JPY 55 trillion, up from JPY 45 trillion.
In addition, the central bank extended the intended timescale for completing the asset purchases till end-December 2013 compared to previous deadline of end-June 2013. The credit facility was unchanged at JPY 25 trillion.
As expected, the benchmark uncollateralized overnight call rate has been kept unchanged at 0-0.1 percent by a unanimous vote.
Meanwhile, BoJ downgraded its assessment of the economy, saying that "the pick-up in economic activity has come to pause" reflecting developments in overseas economies.
Equities rose on Bank of Japan easing, with the benchmark Nikkei 225 Index adding 148.36 points or 1.63 percent to 9,272.13.
Japan's leading economic index declined for a fourth consecutive month in July, final data released by the Cabinet Office showed today. The leading economic index, which is designed to measure the direction of the economy in the months ahead, fell to 93 in July from 94.1 in June. The readings for July and June were revised up from 91.8 and 93.2, respectively.
The coincident index, which measures the current economic activity, dropped to 93.8 in July from 94.9 in June, after being revised from 92.8 and 94.1 respectively.
The yen touched 128.75 against the pound around 12:15 am ET, its weakest level since May 15. The next downside target for the yen is seen around the 129.45/50 area. The yen looks bearish against the pound until it reach a key demand zone at 131.80/85.
The Japanese currency dropped below the key 85.50 level against the Swiss franc for the first time since mid-May. The yen is likely to extend decline as the 50.0 percent retracement target of 85.40 has broken in the daily chart between a high in March and a low in July.
The yen fell to a 2-day low of 103.54 against the euro around 1:10 am ET, compared to 102.83 hit late New York Tuesday. The yen is presently worth 103.50 versus the euro and a move below Monday's low of 103.88 could set its weakest level in more than 4-months.
The Japanese unit reached a 4-week low of 79.22 against the US dollar around 1:10 am ET. The yen reversed direction from a key resistance area of 77.20/15 level last week following the Federal Reserve announced its bond buying program. The next key level to watch on the downside is around the 79.50/60 area.
The yen also slumped to new multi-month lows of 65.71 against the New Zealand dollar and 81.44 against the Canadian dollar around 1:10 am ET. At the same time, the yen reached a 2-day low of 82.90 against the Australian dollar after the BoJ. On the downside, the Japanese currency may find target levels at 83.10 against the aussie, 66.25/30 versus the kiwi and 81.90/82.0 versus the loonie.
New Zealand saw an unadjusted current account deficit of NZ$1.797 billion in the second quarter of 2012, Statistics New Zealand said today. That missed expectations for a shortfall of NZ$1.620 billion following the upwardly revised deficit of NZ$1.072 billion in the first quarter.
The current account/GDP ratio was -4.9 percent, topping forecasts for a 5.2 percent contraction after dipping 4.8 percent in the previous three months.
Looking ahead, Bank of England will release the minutes of its September 6 meeting at 4:30 am ET.
The Swiss ZEW survey results for September and the eurozone construction output for July are also expected in the European session.
The U.S. housing starts and building permits and existing homes sales-all for August are the key data to watch in the North American session.