Wednesday, Aug 08, 2012

--Euro remains relatively firm vs yen, dollar amid ECB, Fed policy measure expectations

--Participants closely watching developments linked to Japan's tax hike bills

--BOJ expected to refrain from taking additional easing action Thursday

 

   By Kosaku Narioka 

 

The euro remained relatively firm versus the yen and the dollar Wednesday in Asia amid relatively quiet summer trading, as participants adopted a wait-and-see stance ahead of the outcome of the Bank of Japan's policy setting meeting on Thursday while also monitoring political developments that might influence the fate of Japan's consumption tax hike bills.

Helping buoy mild risk-taking sentiment and keeping the common currency firm were expectations over possible policy action by the European Central Bank and the Federal Reserve.

ECB President Mario Draghi announced last week that the bank may soon buy government bonds again on a scale that is "adequate" to help eliminate "exceptionally high risk premia" reflected in some bond prices. Details of the program are yet to emerge.

The Bank of Japan, meanwhile, is expected to refrain from taking additional easing action at the end of its two-day policy board meeting, a poll of economists showed, citing the solid recovery in the domestic economy and calmness in financial markets.

"They are likely to wait and see what other central banks are going to do--if the Fed will move in September," said Kenichiro Ikezawa, fund manager at Daiwa SB Investments, referring to the possibility that the Federal Reserve may choose to take action before the U.S. presidential election heats up. "The clock is ticking before the presidential election. The scope of the ECB program is yet to come out either."

Uncertainty continues to grow over the fate of Japan's consumption tax hike bills. The main opposition Liberal Democratic Party and its coalition partner New Komeito had agreed to back the legislation. But the LDP is now intensifying its calls for a quick dissolution of the lower house and new elections in exchange for supporting the bills.

The dollar may rise against the yen if the LDP submits no-confidence and censure motions to parliament, said Masafumi Yamamoto, chief FX strategist at Barclays Bank in Tokyo. "If the LDP makes these moves, there will be less chance of the tax bills being passed, which is clearly negative for the nation's efforts to improve its fiscal conditions," he said.

The euro was at Y97.33, as of 0450 GMT, from Y97.46 late Tuesday in New York. Against the dollar it was at $1.2387 from $1.2400, according to EBS. The dollar was at Y78.55 from Y78.60 and was at CHF0.9697 from CHF0.9688. The pound was at $1.5610 from $1.5621.

The Wall Street Journal Dollar Index, which measures the dollar against a basket of currencies, was at 71.49 from 71.44. The ICE dollar index was at 82.336 from 82.271.

 

Interbank Foreign Exchange Rates At 0050 EST / 0450 GMT 

 

 

                          Latest       Previous   %Chg    Daily    Daily   %Chg 

Dollar Rates                             Close             High     Low    12/31 

 

USD/JPY Japan            78.54-58       78.59-63  -0.06    78.66    78.51  +2.14 

EUR/USD Euro            1.2385-88     1.2398-401  -0.10   1.2402   1.2378  -4.43 

GBP/USD U.K.            1.5605-10      1.5619-23  -0.09   1.5623   1.5604  +0.42 

USD/CHF Switzerland    0.9696-700      0.9686-90  +0.10   0.9705   0.9688  +3.47 

USD/CAD Canada          0.9976-80      0.9967-72  +0.08   0.9980   0.9966  -2.27 

AUD/USD Australia       1.0536-38      1.0552-55  -0.16   1.0564   1.0532  +3.22 

NZD/USD New Zealand     0.8122-28      0.8156-62  -0.41   0.8166   0.8121  +4.48 

 

Euro Rate 

EUR/JPY Japan            97.29-34       97.44-48  -0.15    97.48    97.26  -2.25 

 

Source: ICAP PLC 

 

Write to Kosaku Narioka at kosaku.narioka@dowjones.com

(END) Dow Jones Newswires

August 08, 2012 01:50 ET (05:50 GMT)