$A surges against the yen, greenback

(Australian Associated Press)

The Australian dollar is stronger against the Japanese yen and the US dollar after Japan’s central bank left its key interest rate unchanged and overhauled its monetary policy framework in another attempt to boost the country’s economy.

At 1700 AEST on Wednesday, the local unit was trading at 77.37 Japanese yen, up from 76.75 yen on Tuesday.

The Australian dollar was higher against the US dollar at 75.65 US cents, up from the previous day’s 75.56 US cents.

The Bank of Japan’s latest policy decision was the key event for global financial markets on Wednesday, and its policy changes are aimed at keeping long-term interest rates from falling, as low rates are putting financial pressure on its banks and damaging business sentiment.

It committed to continuing its program of buying Japanese government bonds but will now do so with the aim of keeping 10-year yields at around 0 per cent.

The BoJ also said it will try to spark inflation by continuing to print money and expanding currency in circulation until inflation passes two per cent.

CommSec chief economist Craig James said the bond-buying move will benefit banks and insurers, and that was reflected in a rise in Japanese stocks after the BoJ announcement.

But many currency traders had expected a cut to Japan’s key interest rate.

“Given the lack of fresh tangible policy, we are disappointed by today’s BoJ outcome,” Westpac chief currency strategist Robert Rennie said.

Traders will now focus on the US Federal Reserve’s next policy decision, to be announced early on Thursday morning, Australian time.

A rate hike is not expected, but the Fed’s commentary will be closely analysed for indications the central bank will move at its next meeting in December.

CURRENCY SNAPSHOT AT 1700 AEST ON WEDNESDAY

One Australian dollar buys:

* 75.65 US cents, from 75.56 cents on Tuesday

* 77.37 Japanese yen, from 76.75 yen

* 67.90 euro cents, from 67.47 euro cents

* 103.54 New Zealand cents, from 102.89 NZ cents

* 58.33 British pence, from 57.87 pence

GOLD:

* The spot price of gold in Sydney at 1700 AEST was $US1,318.76 per fine ounce, up $US1.47 on Tuesday’s price of $US1,317.29.

BOND SNAPSHOT AT 1630 AEST:

* CGS 5.25pct March 2019, 1.6259pct, from 1.6332pct on Tuesday

* CGS 4.25pct April 2026, 2.1247pct, from 2.1134pct

Sydney Futures Exchange prices:

* December 2016 10-year bond futures contract, was at 97.86 (2.14 per cent yield), down from 97.875 (2.125 per cent) on Tuesday.

* September 2016 three-year bond futures contract, was at 98.41 (1.59 per cent), up from from 98.4 (1.6 per cent).

(*Currency closes taken at 1700 AEST previous local session, bond market closes taken at 1630 AEST previous local session)

 

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