The yen rose more than 1% against all 16 of its major peers after the Bank of Japan refrained from introducing additional stimulus measures that tend to weaken a currency.
The Japanese currency snapped a two-day decline against the dollar as the BOJ held back from extending the maturity of loans to banks. European stocks declined along with Japan’s Nikkei 225 Stock Average. Australia’s dollar dropped to an almost three- year low after data showed home-loan approvals expanded by less than economists forecast. Malaysia’s ringgit slid to a 10-month low versus the dollar.
“Most investors didn’t expect any action, but a handful of players thought officials might have done something to put a lid on rising bond yields,” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said in a telephone interview from Washington. “Since that didn’t materialize, we’ve seen a sharp selloff in the Nikkei. They didn’t do much to instill optimism that Japan is leaning toward more action to settle markets.”
The yen strengthened 1.9% to 96.92 per dollar at 8:46 a.m. New York time after rising as much as 2.3%. It gained 2% to 128.30 per euro after advancing the most since April 15. Europe’s shared currency lost 0.1% to $1.3243.
The Nikkei decreased 1.5%. JPMorgan Chase & Co.’s G- 7 Volatility Index, based on currency option premiums, reached 10.50%. It touched 10.62% on June 7, the highest level since June 2012.
The BOJ kept unchanged its plan for a 60 trillion-yen to 70 trillion-yen annual increase in monetary base, the central bank said after a two-day meeting ended today. All but three of 23 analysts in a Bloomberg News survey either forecast that the BOJ would approve two-year or longer loan operations at the policy meeting or said such a move was possible.
BOJ governor Haruhiko Kuroda said after the meeting that the central bank would discuss longer fund operations when needed.
“The market is expecting too much too quickly from both the Bank of Japan and the government,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA in London. “We are seeing a higher yen with the market being marginally disappointed. There’s a lack of new newsflow.”