Yen Falls as BOJ Prepares for Easing

With a new and seemingly determined composition of its policy setting board, analysts believe that the Bank of Japan is likely to begin purchasing longer-dated sovereign bonds immediately, which resulted in the currency’s swift and broad fall during the Asian trading session. The currency’s broad downtrend was set off by a media report that the BOJ would begin aggressive purchases of 5-year government bonds in order to tame the country’s prolonged period of deflation.

As reported at 10:25 a.m. (JST) in Tokyo, the USD/JPY pair had been trading at a high of 98.78 Yen, a price unseen in nearly four years; analysts expect to see 100.00 Yen as the first key barrier with 101.50 Yen likely to follow. Meanwhile the EUR/JPY pair traded at a high of 128.32 Yen, a level last struck in January 2010. The currency’s broad downtrend was triggered by a media report that the BOJ would begin aggressive purchases of 5-year government bonds in order to tame the country’s prolonged period of deflation. Currency analysts worldwide, including those from JP Morgan, are issuing client statements calling for broad Yen shorts, especially against the U.S. and Australian Dollars; the AUD/JPY pair hit a fresh 4½ year high at a price of 102.32 Yen.