The Bank Of Japan Reluctantly Slashes Rates By 20bps To 0.3%, Yen Up, Nikkei Down

Daily Forex Fundamentals | Written by AC-Markets | Oct 31 08 09:12 GMT |

Market Brief The Nikkei 225 is down 5% this morning as the BoJ reluctantly cuts it's interest rate for the first time in 7 years. The Yen reacted violently, gaining 1.3% against the dollar (dropping from 98.6 to 96.4 after the rate decision) and 2.0% against the Euro. The Yen then weakened after Japanese close, retracing to the 38.2% Fibonacci level. The Nikkei had risen 26% this week, the largest rise in almost 40 years on easing worries and repatriation, the losing 300 points in the last 10 minutes of trading before the 3 day weekend. The BoJ came under harsh criticism in recent weeks as they failed to address the global and domestic economic slowdown by cutting rates. Their reluctance was all the more apparent in this morning's rate decision as the policy board was split 4 - 4 on the need for easing. Eventually Governor Shirikawa cast the tie-breaking vote, opting for a 20bp cut. The BoJ has been hesitant to join the global push to ease monetary policy as it has deemed it's rates low enough. The decade high 0.5% rate was cut as a $51Bn Stimulus package (the second in a month) was announced - clearly indicating the severity of Japan's situation. The government also - bearishly - reviewed it's economic assessment outlook, stating the sluggish economy was here to stay for the next several quarters. Japan's situation is not isolated in the region. The MSCI Asia Pacific Index retreating 2.1% to 86.36. The Australian stock market was the only one to buck the asian trend this morning, rising 0.4% - the Aussie falling against all currencies. It's interesting to note that the largest economy in the region was the last to cut rates after China, Hong-Kong and Taiwan cut rates this week. Australia and Europe expected to follow suit next week. Japan is closed on monday,Tuesday being the day of the U.S Presidential Election. Will be interesting to see how markets will react on the run up to the election date, on the day and the aftermath. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.