Yen drops on BoJ easing, shares steady after ECB

Thu Apr 4, 2013 8:43am EDT
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By Richard Hubbard

LONDON (Reuters) - The yen sank on Thursday after the Bank of Japan unveiled a bold plan to pump money into the economy, while Europe's main share indexes and the euro held steady after the European Central Bank left policy unchanged.

The BoJ surprised markets with a radical overhaul of its monetary policy framework, promising to inject about $1.4 trillion into the Japanese economy in less than two years as it seeks to end nearly two decades of stagnation.

"The market expected some of these initiatives but not the kind of scale they have delivered," said Daragh Maher, currency strategist at HSBC.

The yen sank by 2.6 percent to around 95.45 yen to the dollar - its biggest daily move since October 2011 - and by 2.3 percent to about 122.30 to a euro. The falls helped lift the dollar 0.8 percent against a basket of major currencies to an eight-month high of 83.39. <FRX/>

As the dollar strengthened, gold fell 3.2 percent to hit$1,546.35 an ounce and at one point touched $1,539.74 an ounce, its lowest level since May 30. <GOL/>

"Further easing from the BOJ should ultimately be positive for gold, but for now seems unable to match the combination of poor sentiment and a firmer dollar," UBS analyst Joni Teves said.

The BoJ's moves also sent Japan's Nikkei stock average .N225 up 2.2 percent, while the 10-year Japanese government bond yield dropped to 0.425 percent, breaking its previous record low of 0.43 percent hit in June 2003.

MSCI's world equity index .MIWD00000PUS slipped 0.2 percent although U.S. stock futures point to a firmer Wall Street open, a day after the Standard & Poor's 500 Index .SPX posted its biggest daily drop in over a month. .N   Continued...

A man is reflected on a stock quotation board outside a brokerage in Tokyo March 25, 2013. REUTERS/Issei Kato