Yen Drops as BOJ Adds Stimulus

By TraderVox.com

Tradervox (Dublin) – The yen closed its first quarter at its lowest since 1995 against major currencies. This resulted from the Bank of Japan’s decision to continue with its plan of asset purchases. This has been a much talked about operation with the Bank of Japan governor indicating that this was always an option for the country. The BOJ deflation efforts have worked so far with the currency falling by 10.4 percent in the first quarter of the year.  

Against the dollar, the yen has fallen 7.8 percent over the last three months to trade at 82.87. The yen dropped 10.9 percent against the euro to settle at 110.56 yen per euro. The euro has also gained against the dollar rising by 3 percent over the first three months of the year to settle at $1.3343. The yen drop has been anticipated as the data from Commodity Futures Trading Commission in Washington showed.

According to Carl Forcheski who is a director at Societe Gemerale SA in New York indicated that the yen is driven by the Bank of Japan’s decision to embark on a monetary easing program. Further, the US labor market is performing beyond expectation. On April 6, the labor department is expected to release data showing that the job market grew for the fourth month with more than 200,000 Americans getting into jobs.

The sharp drop for the yen came after the Bank of Japan indicated that it would increase its asset purchases program to 30 trillion yen from the current one of 20 trillion. The BOJ is targeting an inflation rate of 1 percent currently. Apart from this, the yen has also dropped as demand for safe haven currencies dropped after the European finance ministers settle to expand the region’s crisis fighting power on Friday.

Other factors that have been identified as the reasons for the fall include Japan’s current account data that came negative in January making it the first time this has happened since 2009. The negative reading is as a result of Japan’s increase in the purchases of liquefied natural gas as it tries to recover from the earthquake and Tsunami.

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