Yen Weakens as BOJ May Be Considering Further Monetary Steps

The U.S. Dollar is trading mixed against the Pacific area currencies early Wednesday, posting a loss against the Australian and New Zealand Dollars and a gain versus the Japanese Yen. Equity markets in Asia and the U.S. are also mixed but there are indications of increased demand for higher-risk assets. Firmer crude oil prices are helping to support stocks.

USD/JPY

While increased demand for higher-yielding assets may be putting pressure on the Japanese Yen, there could be an even bigger story developing. According to the Nikkei business daily, the Bank of Japan is mulling further monetary steps.

The Nikkei newspaper is reporting that the Bank of Japan plans to make its negative interest rate strategy the foundation of future monetary easing. The original decision to impose a negative interest rate policy in January caused some controversy. The move could also be a sign that the central bank is running out money to continue to buy assets.

Sources also told Reuters the BOJ may make its massive government bond purchasing more flexible. This move will help the central bank maintain its pledge to increase its holdings at an annual pace of 80 trillion yen ($780 billion).

Currently, the USD/JPY is trading 103.25, up +0.76%.

NZD/USD

The NZD/USD is trading .7282, up +0.54%. The buying was being fueled by increased demand for higher-yielding currencies despite the report of a larger than expected second quarter current account deficit.

According to Statistics New Zealand, the current account deficit for the quarter ending in June was 945 million New Zealand Dollars (US$685 million), compared with a revised surplus of NZ$1.184 billion in the first quarter. Economists and traders were looking for a deficit of NZ$350 million, according to a Wall St. Journal poll.

Statistics further added that increased overseas travel by New Zealanders was behind the deficient. The report also showed that the nation’s net external debt position increased to NZ$141.6 billion in the second quarter, equivalent to -56.3% of GDP.

AUD/USD

Increased demand for higher yielding assets also helped boost the Australian Dollar with the AUD/USD trading at .7481, up 0.0019 or 0.25%.

In other news, the Westpac-Melbourne Institute survey of consumer sentiment rose 0.3% for a second consecutive month in September, following a 2% increase the prior month. Economists said the reason behind the increase were consumers who took favorably to lower interest rates and increased stability following the federal election.