Yen recovers after Kuroda rules out helicopter money

The yen rebounded from six-week lows against the dollar on Thursday, after Bank of Japan chief Haruhiko Kuroda said the bank saw no need to stimulate the economy with "helicopter money".
After dipping below $1.10 on Wednesday, the euro was also steadier as the European Central Bank held off with any immediate further easing of monetary policy, as expected.
Investors had been betting on an aggressive round of stimulus from next week's Bank of Japan meeting, but Kuroda played down the idea of injecting cash directly to businesses and consumers in an interview with BBC Radio 4.
"The comments suggesting that there is no need for helicopter money have sent the Japanese Yen soaring," said David Cheetham, a market analyst with online broker XTB Markets in London.
"It appears rather absurd that dismissing the notion of performing arguably the most extreme form of monetary easing can be taken as hawkish, but this reflects the growing levels of dependency on seemingly ever more stimulus."
The yen surged to as strong as 105.41 yen per dollar after Kuroda's remarks before settling around 106.32, 0.5 percent up on the day. The BBC later said its interview with Kuroda had been conducted in mid-June, helping cool the yen's gains.
The dollar had earlier touched a six-week high above 107 yen on reports that a fiscal stimulus package from Tokyo might be as much as twice as large as previously floated.
More broadly, the US currency was trading near its strongest since March against a basket of its peers, amid renewed expectations that US interest rates would rise by the end of the year.
"The market expects something in easing from the BoJ next week, so that is weighing on the yen," said Dominic Bunning, a currency strategist with HSBC in London.
"Fed pricing has also shifted quite a bit, from a 10 percent chance for a rise this year after the Brexit vote to nearly 50 percent. So in terms of dollar-yen you've got that sort of double whammy."
A broad recovery in risk appetite and speculation about M&A-related flows have also weighed on the yen, after investors fled to the security of Japan following the British vote last month to leave the European Union.
The euro, by comparison, has been steady. All eyes are now on an ECB news conference widely expected to offer hints of future easing, possibly as soon as September.
After the Kuroda comments, the euro was also half a percent lower against the yen. Against the dollar, it was up less than 0.1 percent at $1.1019.

Beyond the yen moves, the biggest decline among the major currencies came in the New Zealand dollar, down 0.7 percent to $0.6976, having touched a six-week low of $0.6952.
The Reserve Bank of New Zealand, as expected by many in markets, used an unusual between-meeting update on policy to say further rate cuts are likely. That cemented expectations for easing at its Aug. 11 meeting.

Source : Arab News