BOJ boosts purchases of ETFs

Andrew Cummings
August 8, 2016

Investors are now looking ahead to the release of United States economic growth data or the second quarter gross domestic product figures due later in the day.

BOJ stimulus falls short of market expectations * Palladium, platinum on track for monthly gains * GRAPHIC-2016 asset returns: (Updates throughout, changes dateline from BENGALURU) By Clara Denina LONDON, July 29 (Reuters) - Gold steadied on Friday, as investors assessed the impact of a modest Bank of Japan stimulus, and was on track for a second monthly gain in a row, while the dollar retreated.

"This isn't bad enough to signal that the USA economy is falling apart, but it's another nail in the coffin of a September Fed hike", said Steven Englander, global head of foreign exchange strategy at Citigroup in NY.

The central bank, however, said it will conduct a thorough assessment of the effects of negative interest rates and its massive asset-buying program, suggesting that a major overhaul of its stimulus program may be forthcoming.

The US dollar tumbled 1.7% to three-week lows, last trading at 103.46 yen.

The safe-haven yen jumped against the dollar to 103.46 yen, up 1.7 percent, hurting sentiment and sent stocks lower in mid-afternoon trade.

JAPAN-ECONOMY: Japan's central bank ended a policy meeting Friday by announcing it will expand purchases of exchange traded funds from financial institutions to help inject more cash into the world's third-largest economy and pursue its 2 percent inflation target.

The weak data "crushed" the dollar, said Christopher Vecchio, currency analyst at DailyFX, in a note.

German 10-year bonds halted a two-day advance after the Bank of Japan kept its key monetary tools unchanged, in a decision that disappointed investors who predicted a bigger increase in stimulus from the Asian nation.

The dollar shed 1.1% versus the yen in July and is down more than 15% against its Japanese rival since the end of 2015, despite the BOJ's aggressive easing efforts. "But investors were disappointed with the result, they think it is not enough to prop up the economy of Japan", she said in an interview. Prime Minister Shinzo Abe said Wednesday he plans to unveil a Yen28 trillion fiscal stimulus plan on August 2.

"We can continue to expect elevated volatility and possible short-term risk of yen strength back towards possibly 100", How added.

Gold spiked in Wednesday's after-hour session after the Federal Open Market Committee (FOMC) left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% at the conclusion of its July monetary policy meeting.

Friday's action marked the latest swing for the yen.

The British pound also traded weaker, down 0.21 per cent to US$1.3188 on Thursday morning while the euro weakened, down 0.06 per cent at 1.10825.

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