In Asian deals on Tuesday, the yen dropped after the Bank of Japan decided to lower its overnight lending rate further to between 0-0.1% from 0.1%, amid widespread concerns the Japanese economy could slump back into recession. The yen plunged to an 11-day low against the franc and a 6-day low against the dollar and the pound.
The bank also announced a new 5 trillion yen fund to buy assets in a bid to boost liquidity in the deflation-wracked economy.
“The bank will maintain the virtually zero interest rate policy until it judges that price stability is in sight, on condition that no problem will be identified in examining risk factors, including the accumulation of financial markets,” the BOJ said in a statement.
The announcements come after the central bank intervened in the currency markets for this first time in six years last month to stem the rapid rise in the yen. Latest figures showed the Japanese economy had stagnated, edging up 0.1% between April and June.
Earlier today, the Reserve Bank of Australia unexpectedly left its cash rate unchanged at 4.5%. Most analysts had been expecting a rate hike of 0.25%.
At 12:50 am ET Tuesday, the yen slipped to a 6-day low of 84.0 against the U.S. dollar and a 1-week low of 133.06 against the British pound, compared to Monday’s close of 83.38 and 131.98, respectively. If the yen falls further, it may likely target 85.4 against the dollar and 133.8 against the pound. As of now, the yen is worth 132.70 against the pound and 83.80 against the dollar.
The yen dropped to an 11-day low of 86.45 against the Swiss franc by about 12:50 am ET Tuesday. If the yen weakens further, it may likely target a 4- 1/2 -month low of 86.53. The franc-yen pair that closed yesterday’s trading at 85.85 is now worth 86.30.
At 12:50 am ET Tuesday, the yen declined to 114.95 against the euro and 82.15 against the Canadian dollar. The next downside target level for the Japanese currency is seen at 115.3 against the euro and 84.1 against the franc. At present, the yen is worth 114.60 against the euro and 81.83 against the loonie, compared to yesterday’s close of 114.08 and 81.53, respectively.
The Eurozone retail sales for August and the final services PMI reports from the major European economies for September are slated for release in the European session.
The U.S. ISM non-manufacturing composite index for September is due for release in the New York morning.