Yen keeps distance from one-month low after Kuroda comments, Aussie gains

EghtesadOnline: The yen kept some distance from a one-month low against the dollar on Tuesday after Bank of Japan Governor Haruhiko Kuroda held back from signaling further easing, acknowledging instead the costs of the BOJ's aggressive stimulus.

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06 September 2016

The Australian dollar rose 0.5 percent after data on government spending and current account deficit pointed to solid economic growth last quarter, and as the Reserve Bank of Australia kept interest rates on hold as expected, reports Reuters.

The U.S. dollar was trading at 103.67 yen JPY=, having fallen from Friday's one-month high of 104.32.

Though Kuroda signaled his readiness to expand an already massive stimulus program in his speech on Monday, he did not provide any explicit hints on the chances of the BOJ aggressively easing policy at its next review on Sept. 20-21.

In addition, many analysts noted that Kuroda admitted for the first time that his stimulus drive has its costs, even though he disputed the view that the BOJ's stimulus is reaching its practical limit.

"For those who had been believing in a Kuroda who stresses only the benefits of easing, the speech would have been disappointing," said Makoto Noji, senior strategist at SMBC Nikko Securities.

"To be sure, he is unlikely to change his policy framework given that he was preaching the benefit of stimulus. Yet many market players might have felt that the costs are likely to outweigh the benefits in the future," he added.

On the technical analysis charts, the dollar has been capped by the Ichimoku cloud bottom in the past few days, failing to extend its rally from around 100 yen in late August, driven by hopes that the U.S. Federal Reserve was likely to raise interest rates by the end of year.

"I was thinking the dollar could gain further but looking at yesterday's markets, I felt I had to give up on that. The dollar/yen is likely to have hit a near-term peak already," said Kazushige Kaida, head of foreign exchange in Tokyo at State Street.

The yen also bounced back against the euro, which fell to 115.42 yen from Friday's one-month high of 116.37 yen EURJPY=R.

The common currency was little moved against the dollar, staying at $1.1147 EUR=.

The British pound GBP=D4 maintained its firm tone, following surprising resilience in recent UK economic data, trading at $1.3305 in Asia after having hit a seven-week high of $1.3376 on Monday.

The Australian dollar AUD=D4 rose 0.5 percent to $0.7618, hitting a high of $0.7638, its highest level since Aug 26, maintaining its recovery trend from last week's one-month low of $0.7490.

The gains were made after data showed robust government spending bolstered economic growth last quarter while the country's current account deficit also came in well below expectations.

The Reserve Bank of Australia kept the benchmark interest rates on hold at 1.5 percent at the last meeting chaired by long-standing governor Glenn Stevens before he retires this month.