LONDON (Reuters) – The reports of a larger than expected that the fiscal stimulus plan for Japan had the yen on the defensive on Wednesday as investors bet the Bank of Japan (BOJ) would match with a new attack of printing money intended to weaken its currency.
The yen has been hit by speculation, repeatedly denied by officials, that the Bank of Japan will take the next step in eight years of emergency policies worldwide by providing money directly to the government without any commitment.
The latest volley in the debate was a report in the Wall Street Journal, again denied by the Ministry of Finance, that Japan was considering issuing bonds of 40 and 50 years. If the central bank to buy and maintain such debt would be another step towards direct funding of expenditures.
Allied to the promise of Prime Minister Shinzo Abe on Wednesday to compile a stimulus package of more than $ 265 million to revive the ailing economy, which was enough to send the yen 1 percent lower.
“We’ve had a lot of volatility driven by different reports this morning,” said Nguyen Thu Lan, currency strategist at Commerzbank (DE: CBKG) in Frankfurt.
“Measurements show that the biggest for market problem is how it will fund this program. So far it seems that the Bank of Japan is not prepared to do something new and that leaves the possibility of lower for the dollar before Friday’s meeting. “
After falling more than 1 percent in Asian markets, the Ministry of Finance of the denial of the bond issue helped the yen to regain some ground in early trading in London. By 0748 GMT, it was down 0.8 percent to 105,465 units per dollar.
big set piece of the day is the statement by the US Federal Reserve on politics, because after closing the European markets and widely expected to sound a more positive tone about the economy that may reinforce expectations of a rise in interest rates in the US this year.
In that sense, the dollar has mounted softly five weeks of gains against the currency basket defining its broadest force (DXY), as currency markets were surprised by the vote of Britain leaving the European Union At the end of june.
It rose 0.1 percent on Wednesday to support the view of a four-month high hit at the end of last week.
“Some recognition of the improving economic situation is likely in the state and the market will continue to slowly increase the chances of a rate hike in 2016,” Societe Generale (PA: SOGN) said Kit Juckes strategist in a note the morning.
“The dollar will go on getting support as the entire Treasury curve top edges (and) the euro is sticking below $ 1.10.”
The euro rose to $ 1.0997 in early trading in London.