The Japanese yen held its ground today after the Bank of Japan removed limits on its government bond purchases and increased corporate debt buying to help companies hit by the coronavirus crisis. The BOJ’s pledge for unlimited bond buying was widely in line with expectations. The yen is trading at 107.25 per dollar. Against the euro, the yen traded at 116.33, close to its strongest in three years against the common currency. The BOJ previously already had a loose pledge to buy government debt, so holdings increase by around 80 trillion yen a year. The BOJ also said it would increase purchases of corporate bonds and commercial paper as companies struggle with lost revenue. Japan, like most major economies, has urged businesses to close and encouraged people to stay at home to slow coronavirus infections, which is causing a widespread downturn.
Central banks take once again central stage this week as the global economy battles against a deep depression. The Fed has already announced a raft of measures and is expected to stay on hold this week, which is unlikely to trouble the dollar. The stakes are higher for the euro because the ECB is likely to extend its debt purchases to include junk bonds and some investors are worried this could be resisted by some members of the European Union, mainly the Dutch. There is ongoing pressure on policymakers to continue supporting economies and with some bond investors concerned that the U.S. is heading into a deflationary spiral. For Europe, this would go hand-in-hand with a recovery fund from the European Union, which might be worth over €1.2 trillion. China's central bank has also been more active as it intends to provide liquidity and ongoing support to ensure the pandemic-driven downturn is short-lived.
The antipodean currencies were buoyed as investors acknowledged the success both countries have had in emerging from the coronavirus pandemic with New Zealand getting closer to eradicating the virus. The Australian dollar rose 0.58% to $0.6452 as more than a million Australians rushed to download an app to help trace close contacts of COVID-19 patients. The New Zealand dollar gained 0.47% to $0.6057 before its strict lockdown is eased today at midnight. The Aussie and kiwi also managed to gain against the Japanese currency after BOJ’s intervention. The US dollar has risen in recent weeks due to a funding crunch and safe-haven inflows, but the greenback is likely to fall in the long term because the Fed has eased monetary policy more aggressively than other central banks. Positioning in currency futures may give dollar bulls some reason to turn cautious. The euro was little changed at $1.0839. Against the pound, the euro is trading at 87.28 pence. The pound was also stable against the USD at $1.2417.
U.S. coronavirus cases rose 3.3%, below the one-week average as Europe prepares to ease lockdown measures. Italy will do so on May 4 after reporting the fewest deaths since mid-March. Fatalities in the UK and New York were the lowest in more than three weeks. New York Governor Andrew Cuomo sketched out a phased-in reopening that begins with construction and manufacturing as soon as May 15. Spain and France reported the smallest number of fatalities in more than a month as both nations set plans to reopen their economies. Belgium, which has the highest per-capita death rate in the world, mainly due to rigorous data gathering, is considering the same. The UK has so far remained reticent about how and when it will scale back lockdowns, while German officials cautioned against a rush to reduce controls. UK Prime Minister Boris Johnson is due to go back to work today, while the country is also planning to roll out mobile testing units. Singapore — with one of Asia’s smallest populations —now has the region’s third biggest number of cases. The island nation reported 931 new cases on Sunday, with the total number of infections exceeding 13,000, overtaking Japan. In Asia, only China and India have more cases.