The U.S. Dollar and Japanese Yen both lost ground in early London trading today following movements by the government of Australia to further stimulate their flagging economy with a key interest rate cut and the unveiling of a new stimulus package, and the Bank of Japan’s recently announced scheme to buy shares. Australia’s Reserve Bank reduced the key cash rate by 1%, to a new low of 3.25; this move was widely expected, however.
Early today, the Bank of Japan announced that it would begin buying nearly $11 billion in shares in Japanese banks; they cautioned that the share purchase scheme would only continue for a period of approximately 15 months, and shares bought would be rated at least BBB- as rated by international rating companies.
Both moves eased investor concerns over the world’s economies and banking systems, albeit those moves are believed to be only temporary. According to a BNP Paribas senior currency strategist, the Australian and Japanese stimulus measures should not have a sustained impact, and any potential correction in the market is expected to be short-lived.
Investors are continuing to look to the equity markets for clues, as they were somewhat higher in the European trading markets; this helped prop up the Japanese Yen and the U.S. Dollar which were considered safe haven currencies.
The Australian Dollar saw a gain of 1.1%, trading at $0.6385; versus the Japanese Yen, the AUD moved up 1.4% to 57.29 Yen. The Euro remained flat against the U.S. Dollar, trading at $1.2852 and traded similarly versus the Yen, trading at 114.98 Yen.