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FOREX-Euro near 2-wk high; yen firms briefly after BOJ

Published: October 5, 2012 | 6:53 am
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* Yen inches up after BOJ stands pat, but gains limited
* Euro clings to gains made overnight
* ECB says it is ready to buy bonds
* Investors await U.S. jobs data later on Friday

SINGAPORE, Oct 5 – The euro inched down but stayed near a two-week high versus the dollar on Friday, finding support after the European Central Bank said the previous day that it was ready to buy bonds of troubled euro zone members.

The yen briefly nudged higher after the Bank of Japan kept monetary policy unchanged and held off from additional easing measures. The reaction was limited, however, as Friday’s decision was in line with expectations.

The euro dipped 0.1 percent to $1.3013, still hovering near Thursday’s high of $1.3032 on trading platform EBS, its strongest level since Sept. 21.

ECB President Mario Draghi said on Thursday that everything was in place for the bank to buy the bonds of struggling euro zone countries such as Spain and that conditions linked to it need not be punitive.

But Draghi, speaking after the ECB left interest rates unchanged at a record low 0.75 percent, offered no clues as to when Spain might make a formal aid request that would activate the programme.

Overall, traders seem to be waiting to sell the euro on rallies, but they are reluctant to do so now as Spain is considered likely to eventually seek assistance, said a trader for a Japanese brokerage house in Tokyo.

“People who want to go short are looking to do so after a Spanish request for aid triggers a rally in the euro,” the trader said, referring to traders who are eager to put on bearish bets against the single currency.

In addition, the euro has been supported recently by the unwinding of euro-bearish bets against currencies such as sterling and the Australian dollar, he said, adding that the single currency may continue to find support until such buying subsides.

The euro eased 0.2 percent against the Australian dollar to A$1.2676, but remained close to a four-month high of A$1.2718 hit on Thursday.


The yen gained a slight, short-lived boost when the BOJ kept monetary settings unchanged after having loosened policy only last month, in a move that was in line with market expectations.

The dollar dipped from around 78.45 yen to an intraday low of 78.27 yen following the BOJ’s announcement. But the dollar later trimmed its losses to stand at 78.38 yen, down 0.1 percent from late U.S. trade on Thursday.

Although the BOJ’s decision to keep policy unchanged had been expected, the yen rose as there had been a risk that the central bank might surprise with another policy easing, said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

“The Bank of Japan didn’t move too long ago, but I think since then, there’s almost been an expectation that central banks are going to keep on pushing on the monetary levers,” Kotecha said.

“There was always an outside chance that we might see a follow-up today,” he added.

Japanese officials have been fretting about the strength of the yen, which has remained resilient despite the BOJ’s easing last month.

Part of the reason is that the U.S. Federal Reserve’s own stimulus programme has made the greenback unattractive for many investors.

At 1230 GMT, the U.S. will be releasing nonfarm payrolls data for September. With the Fed aiming to reduce unemployment, the market will closely watch the figures.

The dollar is unlikely to fall to levels below 77.50 yen even if the jobs data is weak, said a trader for a major Japanese bank in Tokyo, adding that the greenback would probably find buyers at levels under 78.00 yen.

On the top side, the dollar faces possible resistance at its 100-day moving average, which comes in near 78.83 yen.


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