The yen clawed higher on Thursday after the Bank of Japan held off from expanding its monetary stimulus, disappointing some market players who had been looking for further easing. The dollar extended its losses and slipped to a low of 118.54 yen after the BoJ decision, and last traded at 118.64 yen, down 0.3 percent on the day.
The BoJ kept unchanged its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($672 billion) through purchases of government bonds and risky assets. While most market participants had been expecting the BoJ to stand pat, there was some slight speculation that it might add to its monetary stimulus on Thursday, analysts said.
The dollar will probably stay in a 117 yen to 122 yen range for a while, said Sim Moh Siong, FX strategist for Bank of Singapore. "There's no obvious catalyst for yen weakness at this stage," Sim said. The BoJ will probably take a wait-and-see stance for a while since wage growth seems to be picking up in Japan and the economy is improving, albeit mildly, Sim said.
The dollar meanwhile has been held back by recent weakness in US data, including data on Wednesday that showed the US economy nearly stalled in the first quarter. The Federal Reserve's post-meeting statement on Wednesday said the economic slowdown was probably transitory but still suggested any interest rate hike will not happen soon. The yen climbed against the New Zealand dollar, which slid 1.1 percent to 90.34 yen.
The New Zealand dollar came in the cross hairs of sellers and shed nearly a full US cent in response to dovish comments from the Reserve Bank of New Zealand (RBNZ). The kiwi fell to a low of $0.7593, from $0.7683 after the RBNZ said it could cut interest rates if domestic demand weakened and inflation pressures eased. The kiwi last traded at $0.7619, down 0.8 percent on the day and retreating from a three-month high of $0.7744 set on Wednesday.
The euro fell 0.3 percent to $1.1101, down from Wednesday's two-month high of $1.1188. The euro had rallied on Wednesday after German yields rose on easing deflation fears, and as the surprisingly soft US gross domestic product data weighed on the dollar. Its rally on Wednesday lifted the euro above a series of daily highs touched between mid-March and early April. The euro is also testing resistance at roughly around $1.1150 or so, where the top of the daily Ichimoku cloud now lies.
"Based on (economic) fundamentals I think the rebound is excessive and that this is an opportunity to go short the euro," said Masashi Murata, currency strategist at Brown Brothers Harriman in Tokyo. Still, market participants may be cautious about taking fresh short positions in the euro now given its technical strength, and also because dollar-buying sentiment has waned, Murata said. The euro will probably trade in a $1.10 to $1.12 range for a while, he added.
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