Yen strong as excitement over BoJ easing fades

TOKYO - The yen remained strong against the dollar and euro in Asia on Thursday as the effect of the Bank of Japan's monetary easing fizzled out.

The dollar briefly topped 79.00 yen (S$1.23) on Wednesday soon after the central bank said it would boost its asset purchase programme by 10 trillion yen.

But the greenback fell back quickly, changing hands at 78.35 yen in Tokyo morning trade Thursday, in line with levels in New York late Wednesday.

The euro was at 102.17 yen, down from 102.24 yen in US trade and the 103-yen range in Tokyo late Wednesday.

The European common currency bought US$1.3044 (S$1.60) against US$1.3049 in New York.

A lower dollar against the yen was "not a surprise after the market adjusted to the BoJ's latest monetary easing", National Australia Bank said in a note.

"Japan's asset-purchase programme doesn't match its peers. On the currency front Japan is going to have to ramp up policy in a major way before it has a sustainable impact on the Japanese yen," it said.

"Everyone wants a weaker currency at the moment, and unfortunately, that's not possible," it said, adding: "the race to the bottom continues."

The BoJ move came a week after a Federal Reserve announcement to start a new bond purchase programme, while the European Central Bank at the start of the month said it would buy the bonds of struggling eurozone countries to shore up the 17-nation bloc.

The Australian bank said the German Purchasing Managers Index (PMI) for business activity, to be released later Thursday, could prove weaker than expected.

"With the run up in the euro and lessening of sovereign risk, the markets may start to pay a little more attention to economic data, as opposed to politics.

"As such, a poor outcome in the PMI may see the euro/dollar consolidate around US$1.30," it said, adding the soothing policies from the ECB and the Fed are euro-supportive.