Yen falls on rate cut talk; profits hit U.S. stocks

Fri Apr 22, 2016 2:11pm EDT
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By Caroline Valetkevitch

NEW YORK (Reuters) - Speculation that the Bank of Japan could effectively start paying banks to borrow its cash caused the yen to tumble on Friday, while U.S. stocks fell on disappointing profit reports from some top companies.

Shares of Google's parent, Alphabet, dropped 5.7 percent to $735.72, a day after it missed Wall Street targets for first-quarter profit and revenue, and shares of General Electric also were down following results.

A Bloomberg report that Japan's central bank might go further with negative interest rates caused the U.S. dollar to hit its highest level against the yen in about three weeks. It rose 2.1 percent to 111.74 yen .

If the BOJ were to apply its negative rate policy to bank loans, it would allow the central bank to cut its deposit rates deeper into negative territory without acting as a headwind for the nation's banks, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.

"It gives the Bank of Japan more room to cut rates deeper into negative territory, and that's what the yen is reacting to," Esiner said. The Bank of Japan meets next week.

Nasdaq led losses in U.S. stocks, falling about 1 percent. Microsoft was down 6.9 percent after it reported results late Thursday.

The Dow Jones industrial average was up 14.38 points, or 0.08 percent, to 17,996.9, the S&P 500 had lost 1.92 points, or 0.09 percent, to 2,089.56 and the Nasdaq Composite had dropped 47.58 points, or 0.96 percent, to 4,898.31.

The MSCI world stock index was down 0.5 percent, while the pan-European FTSEurofirst 300 index ended off 0.4 percent, weighed down by carmakers.   Continued...

Traders gather for the IPO of real estate investment trust MGM Growth Properties LLC., on the floor of the New York Stock Exchange (NYSE) in lower Manhattan in, New York, U.S., April 20, 2016. REUTERS/Brendan McDermid