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Yen sinks to multi-year dollar low in Asian trade

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(Globalpost/GlobalPost)

The yen sank to a three-and-a-half year low against the dollar in Asia on Friday after the Bank of Japan unveiled a huge stimulus plan aimed at ending decades of deflation and boosting the economy.

The Japanese unit extended losses seen on Thursday immediately after the central bank made its announcement, which took investors by surprise.

However, some analysts warned the unproven measures could end up inflating the country's huge national debt with little else to show for it.

In Tokyo morning trade, the dollar soared past the 97-yen level to its highest since August 2009, good news for Japanese exporters as it makes them more competitive overseas and boosts the value of foreign income.

The greenback fetched 97.05 yen against 96.33 yen in New York late Thursday, before settling at 96.35 yen in the afternoon trade. It was way up from below the 92.71 yen level before the announcement.

The euro also jumped to 125.43 yen, from 125.20 yen in US trade, and much higher than 119.66 yen Thursday morning. It fetched 124.59 yen in the afternoon.

Analysts said the Japanese currency would likely face further pressure Friday.

"The key focus has been the yen, after the Bank of Japan yesterday over-delivered on easing expectations," National Australia Bank said.

"The BoJ's actions were supportive of yen weakness."

Market speculation had been building for weeks about what the BoJ would do after its first policy meeting under new chief Haruhiko Kuroda, who earlier this week had promised bold measures.

The BoJ said it would aim to double the money supply and aggressively increase asset purchases, including longer-term government bonds, in a move aimed at pushing down long-term interest rates to encourage companies and individuals to borrow, instead of hoarding their cash.

The bank also said it was aiming to hit a two-percent inflation target within two years, to reverse years of falling prices that have weighed on Japan's economy by crimping private spending and corporate investment.

Kuroda said the new-look bank was "resolved to take whatever measures we can think of" to hit the ambitious target, seen as more explicit than the bank's previous inflation "goal".

London-based Capital Economics said the BoJ ushered in "bolder steps than we had thought likely".

But it added: "The bank won't help itself in the long run if it makes promises it can't keep and here, we suspect, doubts will start to creep in."

The euro bought $1.2925 against $1.2934, after European Central Bank president Mario Draghi said its policy board had discussed cutting rates at its latest meeting before deciding to leave them unchanged.

"The ECB's press conference was consistent with additional monetary easing to come in the next few months," Credit Agricole said.

The dollar was mostly higher against other Asia-Pacific currencies Friday, firming to 1,129.03 South Korean won from 1,123.65 won a day earlier, to 54.79 Indian rupees from 54.61 rupees and to 41.19 Philippine pesos from 41.06 pesos.

It also advanced to Sg$1.2397 from Sg$1.2396 and Tw$29.92 from Tw$29.88, but eased to 9,756 Indonesian rupiah from 9,760 rupiah and to 29.32 Thai baht from 29.35 baht.

The Australian dollar fell to $1.0418 from $1.0443, while the Chinese yuan fetched 15.53 yen against 15.26 yen.

bur-oh/pj

http://www.globalpost.com/dispatch/news/afp/130405/yen-sinks-multi-year-dollar-low-asian-trade