Yen Halts 2-Day Decline as Kuroda Downplays Weaker Currency Talk

  • BOJ's Kuroda says monetary easing not a promise of weaker yen
  • Bar low for disappointment from the BOJ, RBC's Trinh says

Japan's 40-Year Bond Falls to Record Low

The yen halted a two-day drop versus the dollar as Bank of Japan Governor Haruhiko Kuroda said monetary easing is not a promise of a weaker currency or stronger equities. 

The Japanese currency, which erased earlier gains on Wednesday, has appreciated the most among its Group-of-10 peers against the dollar this year. Traders are weighing whether the BOJ will introduce further policy measures to support growth and inflation at its April 27-28 meeting. The yen, which is often sought by investors for its relative safety in times of market turmoil, recovered from declines earlier this week as stocks in China slid and were little changed in Europe.

“It will be very interesting to see what the BOJ do at their next meeting,” said Petr Krpata, a London-based foreign-exchange strategist at ING Groep NV. “Some in the market are expecting that they will have to do something very surprising to stem the yen’s strength but we think the toolkit of what they can do and to what extent they can weaken the yen via monetary measures is extremely narrow.”

Japan’s currency was little changed at 109.33 per dollar as of 9:49 a.m. New York time, after losing 0.4 percent in the previous two days. It strengthened to a 17-month high of 107.63 on April 11.

BOJ Easing

Kuroda said Wednesday that he wouldn’t hesitate to take further easing measures if needed. The BOJ adopted negative rates in a surprise Jan. 29 decision as part of an effort to fend off deflation. The yen has since climbed about 11 percent against the greenback.

The yen’s retreat on Tuesday was overdone, said Sue Trinh, Royal Bank of Canada’s Hong Kong-based head of Asian foreign-exchange strategy.

“Expectations are high for more big-bang measures and the bar is low for disappointment,” from the BOJ, Trinh said. “The risk in general is that the rally in risk assets has too much in the way of good news priced in, and thus is vulnerable in the event of the slightest bad news.”

The Aussie held four days of gains against the dollar on Wednesday, even as Chinese equities headed for their biggest decline since February. It was little changed at 78.05 U.S. cents after climbing on Tuesday to a 10-month high. New Zealand’s dollar declined 0.9 percent to 69.84 U.S. cents.

The Shanghai Composite Index retreated 2.3 percent while West Texas Intermediate crude oil futures weakened about 1.5 percent.

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