Forex News – EURJPY drops to 5-week low after BOJ

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Euro tumbled to a five week low against yen on Thursday as safe haven flows increased on uncertainty about the EU’s progress in addressing its debt crisis. Also the Bank of Japan held its monthly policy meeting today and announced that it refrained from further easing. This helped boost the Japanese currency.

BOJ kept its key overnight call rate between 0.0 and 0.1 percent by a unanimous vote. This was expected. The central bank also opted not to ease monetary policy further.

In its statement the central bank maintained its view that the Japanese economy is gradually picking up, signalling its conviction that solid domestic demand will help a recovery resume without additional stimulus.

The total size of the BOJ’s asset-buying and lending programme was kept unchanged at 70 trillion yen ($879 billion).However, the BOJ fine-tuned its asset-buying and lending programme, pledging to buy more short-term securities while reducing the amount it offers under fixed-rate market operations.

The BOJ last eased policy in April and also prior to that in February via increases in its asset-buying programme. The move was to show its determination to achieve its 1 percent inflation target.

EURJPY fell to 96.83 by 07:33 GMT, its lowest level since June 4. The pair was under further pressure during a press conference by BOJ Governor Shirakawa.

Shirakawa said that Japan is expected to reach a 1 percent inflation rate in the not too distant future.

USDJPY is also down from 79.93 to 79.28 in early European trading.