Yen posts big gains, stocks fall after BOJ surprise

Thu Apr 28, 2016 5:14pm EDT
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By Dion Rabouin

NEW YORK (Reuters) - Stocks around the globe fell on Thursday after the Bank of Japan surprised markets by holding interest rates steady and declining to adopt more stimulus, pushing the yen sharply higher against major currencies.

The Japanese currency recorded its biggest one-day gains against the dollar, euro and sterling since March 2011.

The BOJ's decision was particularly jarring in the face of soft global demand and after earlier media reports said the central bank intended to cut rates deeper into negative territory.

The dollar fell to a 2-1/2-week low against a basket of currencies, weighed down by the yen's strong move and gains in commodity-linked currencies such as the Australian and New Zealand dollars.

The U.S. Federal Reserve's decision on Wednesday to hold rates unchanged and its failure to signal strongly that a rate hike was coming at its next policy meeting in June also pressured the dollar lower, analysts said.

"The fact that the Fed was dovish and the BOJ did not deliver was certainly the hard combination that drove dollar/yen lower," said Sebastien Galy, a currency strategist at Deutsche Bank in New York.

Tokyo's Nikkei stock index slumped 3.6 percent overnight.

The Tokyo Stock Exchange will be closed for a national holiday on Friday and the benchmark Nikkei index ended the shortened trading week down 5 percent.   Continued...

A man walks past an electronic board displaying the Nikkei average outside a brokerage in Tokyo, Japan, April 1, 2016. REUTERS/Thomas Peter