Asian markets were gripped by fear overnight as the toll from the Japanese earthquake failed to steady. Stocks in the region slumped led by a 6.2% loss for the Nikkei Dow 225 index of leading companies as one after another halted production. Expectations that a flood of yen returning from deployment overseas would send the yen to a record high were countered by actions from the Bank of Japan, which was swift to expand its asset purchase plan to calm sentiment and encourage a frozen risk appetite to thaw.
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Japanese yen – Coverage of the Sendai-earthquake is likely to dominate the media for the next week at least after a 33-foot high tsunami encroached inland by an incredible 12 miles devastating anything in its wake. The flooding has left 350,000 in emergency shelters and the death-toll is likely to be easily above 10,000. At its regularly scheduled monetary policy meeting on Monday the Bank of Japan pumped ¥15 trillion ($183 billion) in to the domestic money market in an effort to preempt a deterioration in corporate and household sentiment. In an enormous effort to prevent a slump in domestic activity, the Bank announced its intention to buy an array of government long and short-dated bonds along with those of domestic corporations. It also said it would buy ETFs and REITs to help provoke risk appetite among investors. The yen surged overnight to reach ¥80.61 before paring gains and turning lower on the day sending it to ¥82.45.
U.S. Dollar – The dollar index is clawing its way back from heavier losses in light of the Bank of Japan’s response to the earthquake, while it’s also lower versus the euro after signs of resolution in the 17-nation Eurozone. The dollar turned lower as risk aversion soared in the Asian session falling to its lowest in a week. The Fed announces its latest monetary policy decision on Tuesday where no change is anticipated. Inflation data is due later in the week for producers and consumers. The dollar index currently trades 0.25% lower at 76.48.