The dollar and euro fell sharply against the yen yesterday as hopes for additional stimulus out of Japan faded, while world equity markets were relatively stable after three days of losses.
Wall Street clawed back some ground after three days of steep losses. US Treasury prices were generally flat after recent gains.
For the second time this week, policymakers from a major central bank cut short expectations for additional stimulus, with the governor of the Bank of Japan, Haruhiko Kuroda, saying yesterday that there was no need for more monetary support to escape deflation.
Investors had expected the BoJ to indicate more support was forthcoming, and the yen rose as the Bank of Japan kept its policy steady.
Comments from the Bank of Japan followed remarks on Monday by several policymakers from the European Central Bank that they would increase policy easing only if they thought the inflation outlook had deteriorated sharply.
Against the yen, the dollar lost 0.8 per cent, to hit a 10-day low of 102.23 yen, while the euro shed 0.5 per cent to 141.01 yen, the lowest level in more than a week.
The yen had been under pressure in recent days on expectations that a rise in Japan’s sales tax, which took effect in at the start of April, would hurt consumption, and that the BoJ might ease policy in coming months to soften the blow.
The dollar index, which measures the dollar against a basket of six major currencies, was off 0.57 per cent and near lows last seen on March 19.
Wall Street, after a wave of selling over three days that caused the biggest drop for the tech-focused Nasdaq since late 2011 and the biggest drop in two months for the S&P 500 and Dow Jones indexes, rose yesterday, led by the tech sector.
The Dow Jones industrial average rose 28.83 points or 0.18 per cent, to 16,274.7, the S&P 500 gained 6.14 points or 0.33 per cent, to 1,851.18 and the Nasdaq Composite added 34.175 points or 0.84 per cent, to 4,113.927.
Investors bought beaten-down shares of social media and Internet companies. The day’s biggest gainers included Amazon.com Inc, up 3.0 percent at $327.44, Yahoo! Inc, up 3.5 per cent at $35.22, and LinkedIn Corp, up 4.7 per cent to $167.04. The Global X social media index rose 3.0 per cent to 18.62.
The US earnings season gets under way this week. Aluminum producer Alcoa Inc will report after the market close yesterday. Financials JPMorgan Chase & Co and Wells Fargo & Co will issue results on Friday.
Global stock markets were mixed, with the MSCI world equity index up 0.07 per cent.
US Treasuries prices, after two days of strong gains, were flat ahead of a $30 billion three-year note sale, the first of $64 billion in new coupon-bearing supply this week.
Investors turned their attention to the impending supply and considered whether the yields would be attractive enough in the auctions after the recent rally.
Benchmark 10-year notes were last up 2/32 in price to yield 2.699 per cent. Thirty-year bonds US30YT=RR rose 4/32 in price to yield 3.555 per cent.
Rising tensions in Ukraine may temper investor appetite for risk. Police detained 70 people occupying a regional administration building in eastern Ukraine overnight, but pro-Moscow protesters held out in a standoff in two other cities, in what Kiev called a Russian-led plan to divide the country.
World financial powers are set to gather this week at the International Monetary Fund’s spring meeting.