The Japanese Yen rebounded versus the U.S. Dollar following a surprise decision by the Bank of Japan which deiced to maintain its current monetary policy rather than expand its balance sheet via its bond purchasing program. The BOJ also cut the 2016 forecast for inflation, noting that the recent slump in oil prices was the main trigger for the forecast cut. The BOJ did, however, say that they planned to expand a bank loan scheme which should increase lending.
AS reported at 9:05 am (GMT) in London, the USD/JPY was down 0.9% to trade at 117.71 Japanse Yen, heading close to the recently struck 1-month low at 115.85 Yen. In the overnight hours, the pair had been as high as 118.87 Yen as investors awaited the central bank’s decision, with the majority of FX traders anticipating easing ahead. The EUR/JPY was also lower at 136.08 Yen, a loss of 0.8% and close to Friday’s 3-month trough at 134.70 Yen.
ECB Draws Investors’ Focus
FX traders’ focus will likely shift to Europe and the decision by the Mario Draghi and the European Central Bank which could lead to another expansion of the ECB’s QE program. With the likelihood that the Euro will once again be devalued, investors sent the EUR/USD pair lower to $1.1573, moving back toward the 11-year low that was struck last week at $1.14595. Analysts point out that the ECB isn’t likely to catch traders “unaware” as more QE has essentially already been priced in.