Markets hit by Bank of Japan inaction

Published: 12 Jun at 9 AM Tags: Dollar,

Equities around the globe have been hit by a decision by the Bank of Japan to hold off for the time being on introducing new monetary stimulus measures. The announcement by the central bank caused the yen to soar against the US dollar. Many investors had expected the BoJ to increase purchases of real estate investment trusts and exchange traded funds.

The decision has added to concerns that other central banks may also rein in their bond buying programmes. The US dollar hit 96.86 yen after slipping 1.9 per cent. The greenback had come close to regaining its 100 yen position after Standard and Poor’s upgraded the US credit outlook to stable from negative.

The Australian dollar also suffered falling 3 per cent to 90.68 yen. Since peaking in April the Aussie has dropped 14 per cent. Over the past few weeks investors have been watching the US Federal Reserve closely for signs that it too may be looking to scale back on its monetary stimulus policy.

There are also concerns about the state of the Chinese economy. Data released at the beginning of the week suggests investment is weakening, inflation slowing, imports falling and trade growth declining.

The commodities markets are feeling the strain and both Brent crude and gold are down.