Yen plummets as BOJ expands its easing program

April 4, 2013 in Forex Analysis

Economic news (4 April 2013) – Today the Forex market is dominated by the BoJ’s decision to step up to a more aggressive easing policy, which resulted in the yen’s sharp fall against all major currency counterparts. On his first official meeting as Chairman of the Board, Haruhiko Kuroda unveiled strong stimulus measures aimed at ending the 15-year deflation the country has been battling. The BoJ also left the interest rate unchanged at 0.1%.

Following the announcement, the yen plunged to its weakest level in seven weeks, trading at $95.54 at the time of writing, or having lost 2.74% of its value.

Despite market makers’ anticipation for bolder steps by the BoJ in expanding the monetary policy, the announced measures exceeded their expectations. The Bank of Japan said it will expand almost twice its holdings of longer-term government bonds and exchange-traded funds, and will be purchasing 7 trillion yen of bonds a month as part of its monetary policy.

This way the country’s money supply will be significantly increased, thus supporting inflation.

Analysts commented that the yen’s sharp decline against the dollar indicated a positive market reaction to the announced stimulus measures.

The yen has been on the radar since current Prime Minister Shinzo Abe took office in December, advocating for more aggressive asset purchasing programme as part of his plan to reviveJapan’s economy.


Technical analysis


At yesterday’s session the dollar climbed from 93.60 to 92.65 against the yen. This morning the currency pair was trading at 92.70-93.05.

Should the dollar successfully overcome the resistance zone at 93.05-93.25, its aim will be reaching and testing the 93.60-93.85 zone. If successful, the upward trend will continue to 94.15-94.30. If it falls below the support zone at 92.80-92.55, the next support zone is expected to be at 92.15-92.20. In case of a breakdown, the downward trend will continue to 92.00-91.70.




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