Friday, 29 July 2016

Gold Jumps as Japanese Bonds Sink

The yen climbed with gold after the Bank of Japan’s expansion of monetary stimulus fell short of some traders’ expectations. Japanese government bonds plunged, while most Asian stocks fell.

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In one of his most-watched meetings as BOJ Governor, Haruhiko Kuroda expanded the central bank’s target for exchange-traded fund purchases, while keeping its government-bond buying budget and its policy interest rate unchanged. The yen strengthened 1.9 percent against the dollar, while JGB futures dropped the most since 2013. The Topix index fluctuated as the MSCI Asia Pacific excluding Japan Index fell 0.2 percent. Gold added 0.4 percent.  

“The BOJ had a choice of about five boxes to tick today, but only chose one,” said Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corp. in Sydney. “And buying more ETFs was as widely expected.”  

A week of dramatic swings in the $5.3 trillion-a-day foreign exchange market is ending with a bang as traders digest the BOJ’s decision, upcoming results of bank stress tests in Europe and second-quarter economic growth figures in America. Investors will also be watching corporate earnings from Sony Corp. to Barclays Plc for further clues on how global monetary easing is filtering through to the economy.  

Markets were volatile in the minutes leading up to the BOJ announcement, with swings in Nikkei 225 stock-index futures and the yen exceeding 3 percent and 1 percent, respectively. Overnight implied volatility for the dollar-yen -- the world’s second-most traded currency pair -- climbed 40 percentage points on Thursday to 53 percent, the highest level since 2008.

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