The yen strengthened for a second day while the Australian and New Zealand dollars weakened as a regional stock market slump boosted demand for safer assets.
The Aussie dropped for the first time in six days after the Reserve Bank of Australia kept interest rates at a record low and said it will weigh the impact of recent global financial turbulence in deciding whether to ease policy further. Asian equities fell, halting a four-day gain, while oil declined amid fading optimism sparked by last week’s surprise Bank of Japan expansion of stimulus.
“The safe-haven yen has strengthened and globally linked currencies such as the Australian dollar and New Zealand dollar have declined as regional equity markets fall,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The RBA appears a little more cautious on the global economy.”
The yen strengthened 0.3 percent to 120.65 per dollar as of 6:48 a.m. in London after appreciating 0.1 percent on Monday. Japan’s currency rose 0.2 percent to 131.52 per euro. The shared currency climbed 0.1 percent to $1.0900.
“The BOJ has made it difficult to buy the yen, but people are also calming down” after the central bank announced negative interest rates last week, said Jun Kato, a senior fund manager in Tokyo at Shinkin Asset Management. “It’s not full risk aversion, but players are reconsidering taking risks aggressively.”
Australia’s central bank kept its benchmark cash rate at 2 percent as forecast by all except one of 29 economists surveyed by Bloomberg.
“Over the period ahead, new information should allow the board to judge whether the recent improvement in labor market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand,” the RBA said in a statement explaining its decision.
Australia’s currency tumbled 0.5 percent to 70.78 U.S. cents, while the New Zealand dollar dropped 0.4 percent to 65.22 U.S. cents.