Photographer: Akio Kon/Bloomberg

Yen Strengthens as BOJ Ponders Communications on Stimulus Exit

  • Japan’s currency advances versus all its Group-of-10 peers
  • Effect on yen unlikely to be long lasting, ANZ’s Goh says

The yen rose and Japanese bonds fell as the central bank was said to be re-calibrating its communications to acknowledge it’s thinking about how to handle a withdrawal from monetary stimulus.

Japan’s currency advanced against all its Group-of-10 peers as people with knowledge of discussions at the central bank said officials were reconsidering its communications without giving the impression an exit from stimulus was currently on the agenda. The nation’s two-year bond yield climbed as much as 2.5 basis points to minus 0.09 percent, the highest since February 2016.

“News about the BOJ potentially talking about an exit strategy from their QE program pushed dollar-yen lower,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. “However, I don’t think the effect on yen will be long lasting. It is prudent for central banks to think about how to exit unconventional monetary policy, but that doesn’t mean it will be something that will occur anytime soon.”

Key global events taking place on Thursday include testimony from former FBI Director James Comey, an European Central Bank’s policy decision and the U.K. election.

  • USD/JPY drops 0.2% to 109.59 after earlier strengthening as much as 0.2%
  • Leveraged accounts shorted USD/JPY on reflex reaction to Bloomberg report the BOJ was said to be conducting simulations internally on how an exit could play out, according to an Asia-based FX trader
  • EUR/JPY falls 0.2% to 123.36
  • AUD/USD little changed at 0.7550 
    • Pair earlier reached session low of 0.7525 after April trade surplus missed even the worst estimate
  • GBP/USD falls 0.1% to 1.2953 before U.K. election Thursday
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