Ahead of the interest rate decision by the Bank of Japan, the Japanese yen climbed to a 4-day high against the British pound, the European currency and the Swiss franc during early Asian deals on Tuesday. The yen also showed strength versus the US dollar.
The Bank of Japan is set to conclude its two-day monetary policy meeting today and then announce its decision on interest rates. Analysts are expecting the bank to keep rates on hold at a record low 0.10 percent.
In its last monetary policy meeting, the Japanese central bank left its key interest rate unchanged at 0.1% and decided to raise its monthly government bond purchases to facilitate smooth money market operations. The previous change in interest rates was a 20 basis point cut implemented in December 2008.
With an intention to ease money market conditions, the Policy Board decided to utilize long-term funds-supplying operations by increasing its outright purchases of Japanese government bonds or JGB.
Japanese government intends to introduce a new stimulus package worth 2 percent or more of gross domestic product, Finance Minister Kaoru Yosano told reporters yesterday. Accordingly, new fiscal spending would exceed 10 trillion yen. Details of the third package are likely to be finalized by April 10.
The yen rose as a fall in Asian stock prices prompted investors to reduce holdings of higher-yielding assets and buy Japan's currency as a refuge from the global economic crisis.
Against the US dollar, the Japanese yen edged higher during early Asian deals on Tuesday. At 8:00 pm ET, the yen reached a high of 100.26 against the dollar, compared to 101.01 hit late New York Monday. The next upside target level for the Japanese currency is seen around 98.8. The dollar-yen pair is currently quoted at 100.59.
The Japanese yen that closed Monday's North American session at 149.21 against the British pound climbed to a 4-day high of 146.89 at 8:00 pm ET. The yen is now worth 147.57 against he sterling with 141 seen as the next target level.
The Japanese unit showed strength against the European currency during Tuesday's early Asian deals. At 8:00 pm ET, the yen hit a 4-day high of 133.65 versus the euro, compared to Monday's closing value of 135.52. On the upside, 131.0 is seen as the next target level for the Japanese currency.
The Japanese currency that closed Monday's New York deals at 88.92 against the Swiss franc rose to a 4-day high of 88.03 at 7:35 pm ET. If the Japanese yen gains further, 87.7 is seen as the next target level. The franc-yen pair is currently quoted at 88.54.
Market participants are eagerly waiting for the seasonally adjusted final gross domestic product report from the euro-zone in the upcoming session. Analysts expect the euro-zone economy to contract 1.3 percent annually.
Across the Atlantic, the U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 pm ET. Consumer credit for February is likely to show a decline of $1.5 billion.
In January, consumer credit rose by $1.8 billion to $2.56 trillion, as revolving credit rose by $0.9 billion to $0.96 trillion and non-revolving credit rose by $0.8 billion to $1.6 trillion.
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