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USD/JPY: No reaction to BOJ’s decision to cut its routine buying of long-dated bonds

  • BOJ has trimmed purchases of long-dated government bonds. The routine operation has failed to move the needle on USD/JPY. 
  • The pair is flat lined below 112.00, having failed to pick up a strong bid yesterday despite the upbeat US data.

USD/JPY pair is currently trading at 111.93, having clocked a 112.00 earlier today. 

The Bank of Japan (BOJ) cut its purchases of bonds with maturities between 10 and 25 years to ¥160 billion, down ¥20 billion from the previous ¥180 billion. 

The central bank has also trimmed purchases of bonds with maturities between 25 and 40 years to ¥40 billion from ¥50 billion previous. 

The central bank’s decision to trim bond purchases is a part of its routine operations to keep the benchmark yield near zero levels. The BOJ steps up purchases when there is upward pressure on yields and trims purchases when the yields are feeling the pull of gravity.  

The routine move, therefore, has had a little positive impact on the anti-risk Japanese yen. The dollar too has failed to pick up a strong bid in response to strong US economic data released yesterday. The consumer spending, as represented by March retail sales, rose 1.6%, which was the strongest pace of growth since September 2017. Further, spending may remain strong in the near future as the jobless claims have hit a 50-year low. 

Looking forward, the spot may remain flatlined below 112.00 amid low trading volumes on account of Good Friday Holiday across Europe and in the US. 

Technical Levels

 

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