Yen edges up after BOJ, pound gains on hopes of lockdown easing

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TOKYO (Reuters) – The yen edged higher on Monday after the Bank of Japan expanded stimulus to help companies hit by the coronavirus crisis while the pound rose against the dollar and euro on optimism Britain may soon ease a month-long lockdown.

The BOJ’s decision to remove limits on its government bond purchases and increase corporate debt buying was widely expected and puts it in line with other major central banks that have unleashed unprecedented amounts of monetary support

Traders now shift their focus to a U.S. Federal Reserve meeting ending Wednesday and a European Central Bank (ECB) meeting on Thursday as major central banks once again take the stage as the global economy battles against a deep depression.

The Fed has already announced a raft of measures and is expected to stay on hold this week, which is unlikely to trouble the dollar, analysts say.

The stakes are higher for the euro, because the ECB is likely to extend its debt purchases to include junk bonds, and some investors are worried this decision could widen rifts between members of the European Union.

“It will be difficult for markets to latch onto the BOJ, because it has already reached the limit of what it can do,” said Takuya Kanda, general manager of the research department at Research Institute in Tokyo.

“Every economy is suffering and all major central banks have already eased policy a lot, so it’s difficult to differentiate from one currency to the next.”

The yen edged up to 107.28 per dollar on Monday.

Against the euro, the yen traded at 116.36, close to its strongest in three years against the common currency.

The BOJ previously had a loose pledge to buy government debt so holdings increase by around 80 trillion yen ($745.30 billion) a year.

The BOJ’s decision to remove this guidance at a policy meeting on Monday was largely symbolic, because actual bond buying has slowed to an annual pace of less than 20 trillion yen due to the central bank’s outsized presence in the market.

The BOJ also said it would increase purchases of corporate bonds and commercial paper as companies struggle with lost revenue.

Japan, like most major economies, has urged businesses to close and encouraged people to stay at home to slow coronavirus infections, which is causing a widespread downturn.

The pound rose against the dollar and the euro on speculation Britain will ease its lockdown as early as this week as Prime Minister Boris Johnson returns to work after recovering from the illness caused by the coronavirus, the Telegraph reported.

Against the euro, the pound rose to 87.20 pence.

Johnson is due back at work on Monday after recovering from COVID-19, the illness caused by the coronavirus.

The antipodean currencies were buoyed as investors acknowledged the success both countries have had in emerging from the coronavirus pandemic.

The Australian dollar jumped 1% to $0.6462 as more than a million Australians rushed to download an app to help trace close contacts of COVID-19 patients.

The New Zealand dollar gained 0.85% to $0.6070 before its strict lockdown is eased on Monday at midnight.

The Aussie and kiwi also managed to gain against the Japanese currency.

In Europe and the United States, officials are also moving to ease some restrictions put in place when the pandemic first occurred.

However, some currency traders say they remain wary because threats posed by the virus have not been eliminated completely.

The dollar has risen in recent weeks due to a dollar funding crunch and safe-haven inflows, but some analysts say the greenback is likely to fall in the long term because the Fed has eased monetary policy more aggressively than other central banks.

The euro rose to $1.0844 on Monday.

The ECB is under more pressure to act this week after EU policymakers last week failed to reach a consensus on the details of a 1 trillion euro emergency fund.

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