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Home / Business / Bonds gain dollar pares losses as BOJ promises to keep interest rates low

Bonds gain dollar pares losses as BOJ promises to keep interest rates low



SYDNEY (Reuters) – Bond prices rose on Tuesday as the dollar made early losses on the yen, cautiously reacting to what was seen as minor improvements to the Bank of Japan's (BOJ) extremely loose monetary policy.

FILE PHOTO: A Japanese flag flutters at the building of the Bank of Japan in Tokyo, Japan, March 1

5, 2016. REUTERS / Toru Hanai / Archive photo

After their two-day board meeting, the BoJ pledged to uphold interest rates "provisionally" very low. It has also taken measures to make its massive stimulus program more flexible, reflecting its forecast that it will take time for inflation to reach its 2% target.

The announcement provided some comfort to bondholders, as the BoJ's monetary stimulus measures were not inclined to move radically away from its accommodative stance. 10-year Japanese government bond (JGB) JP10YTN = JBTC fell 3 basis points, bouncing back from a 1.1 / 2-year high of 0.11 percent, while yields on 40-year bonds fell nearly 9 bps went back points. The shift in JGBs has pushed down the 10-year Treasury yields US10YT = RR.

However, the reaction in currencies was muted as some market participants awaited further clarity. The dollar JPY = decreased losses against the yen and remained unchanged last at 111.06. The dollar index .DXY, which measures the greenback against a basket of major currencies, has barely changed at 94,314.

FILE PHOTO: A man walks past an electronic stock exchange on February 9, 2018 in Tokyo, Japan. REUTERS / Toru Hanai

"The market is definitely cautious at this point, and we hope we can get even more clarity when Kuroda speaks later today," said Rodrigo Catril, senior analyst at the National Australia Bank.

BOJ Governor Haruhiko Kuroda will hold a press conference at 15.30. (0630 GMT) to explain the policy decision.

"At this point, it's very unclear what the BoJ means by allowing long-term interest rates to go up and down, which is as vague as it can be," Catril added.

"The proof will be how they react to open market operations and it will be interesting to see how they increase the 10-year JGB rates, which will set a tone for the market."

EQUITIES

Asian equity markets were able to partially recoup their initial losses, as loose monetary policy for risky assets is positive, although a global decline in technology stocks dampened gains.

The Japanese Nikkei .N225 had recently dropped 0.1 percent, having fallen more than 0.5 percent the day before. The South Korean Kospi index KS11 lost 0.1 percent despite solid second quarter results from Samsung Electronics ( 005930.KS ), leading to 5.7 percent earnings growth.

MSCI's broadest index of Asia-Pacific equities outside Japan. The MIAPJ0000PUS also lost 0.3 percent, while Australian equities remained broadly unchanged. ,

Overnight on Wall Street, the Dow .DJI and the S & P 500 .SPX each lost 0.6 percent and the Nasdaq .IXIC slid 1.4 percent, mainly due to technology stock losses.

The Technology Index .SPLRCT crumbled 1.8 percent as disappointing results from Facebook ( FB.O ), Twitter ( TWTR.N ) and Netflix ( NFLX.O

) A cause for concern over the future growth of a sector that has led US stocks to peak levels.

Investors will devote their attention to other central bank decisions this week. The US Federal Reserve closes its monetary policy meeting on Wednesday, and the Bank of England sees a rate hike on Thursday. Month-end macroeconomic data is also due on Wednesday in China.

The British pound GBP = held at $ 1.3132, drifting from a more than 10-month low of $ 1.2955 touched in early July.

In commodities, the US crude oil price CLc1 fell 35 cents overnight to 69.78 USD after a strong overnight rise, while Brent LCOc1 fell 36 cents to 74.61 USD.

Spot gold was slightly firmer at $ 1,222 an ounce.

Edited by Sam Holmes & Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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