By TraderVox.com
Tradervox.com (Dublin) – The Japanese currency strengthened against its majors despite the Bank of Japan’s announcement of additional stimulus. This was as a result of the market’s doubts on the efficacy of the move to boost economic growth in the country. The yen gained after the BOJ policy makers unexpectedly added 10 trillion yen to the 45 trillion yen bond buying fund. The bank had added 5 trillion in July as the currency strengthened on euro zone crisis concerns. The move brings to a total of 55 trillion yen of the bond buying fund. BOJ is the third central bank to add stimulus following the same move from European Central Bank and the Federal Reserve.
According to Carl Forcheski, the Bank of Japan was a bit more aggressive than the market expected, resulting to a little decline on the yen. However, Carl, who is the Director of Currency Sales in New York at Societe Generale SA, added that as the market digested the move, the yen rebounded. He predicted that there might be more fiscal half-year repatriation going on as we head to the end of the week. The move by the BOJ has added to the yen’s strength. The currency has strengthened by 6.4 percent in the last six months making it the best performer among currencies of the 10 developed nations. The dollar has fallen by 1.2 percent in the same period while the euro has fallen by 2.6 percent.
Japan exporters are experiencing losses as the currency strengthens. According to a Cabinet Office report released on February, the dollar-yen pair has to remain at the level of 82, if Japanese companies are to remain profitable. The average yearly rate is at 78.81 yen per dollar.
After the BOJ announcement, the yen rose by 0.6 percent against the dollar to exchange at 78.38 per dollar at the close of day yesterday in New York. The currency had depreciated to its weakest since August 22 of 79.22. The currency gained by 0.5 percent against the euro to exchange at 102.28.
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