BOJ Keeps Policy Unchanged, Yen Advances

Tradervox (Dublin) - Despite the strengthening yen, the Bank of Japan decided to leave its monetary policy unchanged as they wait for the results of the Greek election. The bank refrained from changing the policy that would have debased the currency enhancing growth in the country. The dollar has continued to decrease against most majors as investors are expecting publication of consumer confidence data expected to show a decline in May. This has added to speculations that Fed should consider easing in the next FOMC meeting scheduled for June 19. The yen increased as central banks from major economies prepared to offer liquidity to the euro area should there be a meltdown following Greece election.

The Bank of Japan decided to keep its asset-purchases kitty at 40 trillion yen coinciding with the market expectation. According to Mitul Kotecha who heads the global currency strategy at Credit Agricole Corporate & Investment Bank in Hong Kong, added that the talk of coordinated action by major central banks had prompted some economists to predict BOJ action and said that had it acted it could have led to decline in demand for the yen. However, this is seen as a strategic move on the side on BOJ as it gives the bank the ability to act should results in Europe be negative for the yen. When the bank changed its monetary policy in February 14, the yen dropped 1.1 percent against the dollar.

After the decision by the BOJ was announced, the yen climbed by 0.6 percent against the euro to trade at 99.66 yen per euro while it climbed by the same margin against the dollar to exchange at 78.87 yen per dollar. It had earlier strengthened to 78.83, which is the strongest it has been since June 6.

The yen is becoming the preferred safe haven currency over the dollar as reports from US today are expected to show that the US economy is losing momentum in its recovery process. Consumer confidence report is expected to show a drop in May.

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