Dollar falls against the yen; bond yields decline

Fri Apr 26, 2013 4:35pm EDT
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By Leah Schnurr

NEW YORK (Reuters) - The U.S. dollar tumbled against the yen on Friday after the Bank of Japan left its monetary policy unchanged, while benchmark U.S. bond yields fell to near 4-1/2-month lows after the U.S. economy grew less than expected in the first quarter.

The disappointing growth rate spurred concerns about a tepid outlook for the United States which, along with recent concerns that China's growth is slowing, also hit the price of oil. Brent crude fell to just above $103 a barrel after rising $3 in the past two sessions.

China and the United States are the world's two largest oil consumers.

The BoJ held off from announcing new monetary policy on Friday, which was not unexpected, but board members suggested inflation may still fall short of the central bank's target for some time. The outlook on inflation in the bank's semi-annual economic report highlighted concerns that the BoJ has an unrealistic goal in its battle to end 15 years of deflation.

The BoJ's announcement in early April of plans for $1.4 trillion in new monetary stimulus triggered a sharp selloff in the yen. However, traders said market expectations for ongoing weakness in the yen had come too far, too quickly. Recent lackluster U.S. data has added to dollar selling, which accelerated on Friday.

"The selling started to feed on itself, and everyone started to jump on the selling bandwagon," said Charles St-Arnaud, foreign exchange strategist at Nomura Securities in New York.

The dollar fell as low 97.54 yen and was down 1.2 percent at 98.02 in late New York trade.

U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter. While that was a jump from the tepid growth seen in the final quarter of last year, it disappointed expectations for a 3 percent pace.   Continued...

Traders work on the floor at the New York Stock Exchange, April 22, 2013. REUTERS/Brendan McDermid