"The dollar-yen pair has already seen a significant pullback. Most market participants are still of the view that it's moving higher over time. It's a question of which levels are they comfortable getting back into the trade."
- Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA
It seems that Japanese policymaker have found a new low-cost way to look like they are easing further their monetary policy without making any bold steps. The Bank of Japan is not attentive to new risks, as they have used the measure that pushed stocks 3% higher without making any changes to its core policy. Moreover, the decision to extend its loan programmes provoked a swift dip in the Yen against the U.S. Dollar.
The Current Governor Haruhiko Kuroda inherited both programmes from his predecessor, Masaaki Shirakawa, who implemented them as a part of defensive camping in order to stave off calls for the kind of unprecedented stimulus programmes. According to the central banks assessment, these initiatives have positively contributed to the economy by catalysing private-sector lending. While making no bold statements or pulling the trigger ahead of the upcoming sales tax hike, Kuroda kept the course of the current policy and avoided signalling any imminent modification. Nevertheless, this decision brushed aside calls from some analysts and market participants to open spigots further– the benchmark Nikkei index has lost almost 10% for the year.
The USD/JPY currency pair has already eased back to almost 100 level so far this year, and despite this move, most of the traders still betting the pair will move to the north in the foreseeable future.
© Dukascopy Bank SA