* BOJ surprises markets with bold easing steps
* Yen eases, Nikkei and JGBs bounce
* Aussie tumbles after RBA holds fire on rates
* European shares flat
By Alex Richardson
SINGAPORE, Oct 5 (Reuters) - The yen fell and government
bond futures jumped on Tuesday after the Bank of Japan unveiled
a slew of monetary policy easing steps, while Australia's
dollar tumbled as its central bank unexpectedly held interest
rates steady.
The uncharacteristically bold move by the BOJ sent the
Nikkei racing higher, bucking the trend elsewhere in Asia,
where a fall on Wall Street and weaker oil and metals prices
dragged equity markets lower. []
European shares, which have endured their longest losing
streak in 18 months, were flat, supported by hopes the U.S.
Federal Reserve is poised to launch a new round of
asset-buying. [] []
Central banks in Japan, the United States and Britain have
been under political pressure to do more to support economies
showing only tepid recovery from the worst recession in
decades.
In a surprisingly aggressive move that pointed to concern
at a strong yen and weak growth, the BOJ effectively reverted
to zero interest rates and said it would pump cash into the
system through a temporary 5 trillion yen ($60 billion) fund to
buy assets such as government bonds or asset-back securities.
"It was an utterly surprising and bold move. The BOJ has
sent a favourable message to the markets, which had been
expecting it to take only small, gradual steps," said Seiji
Shiraishi, chief economist at HSBC Securities Japan.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global interest rates:
http://link.reuters.com/wed86p
BOJ policy rate:
http://link.reuters.com/syz76p
Yen - taking on the market:
http://r.reuters.com/fac44p
BOJ balance sheet/JGB buying:
http://link.reuters.com/ger94p
RBA rates and commodity index:
http://link.reuters.com/byg86p
Chronology of BOJ policy moves:
[]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar rose as high as 83.99 yen <JPY=>, from 83.50
before the decision, and was later trading around 83.70. []
Ten-year Japanese government bond futures <2JGBv1> <JGBv1>
rose about 40 pips to 143.87, the highest in more than seven
years. After trimming some gains, JGB futures were up 0.30
point at 143.75. The benchmark yield <JP10YTN=JBTC> matched a
seven-year low at 0.895 percent, and later stood down 2 basis
points on the day at 0.915 percent. []
"The Federal Reserve is also expected to ease credit in the
near term, so the BOJ had to act now to have a major impact on
the market," said Junko Nishioka, Chief Economist, Japan, at
RBS Securities.
FED TO THE RESCUE?
U.S. Treasuries edged up after comments from Federal
Reserve Chairman Ben Bernanke the previous day that the central
bank's asset purchases had lowered borrowing costs and more
buying could further ease financial conditions. []
The Reserve Bank of Australia, which has led the developed
world in tightening policy even as it remains super-loose in
most rich nations, had been expected by most analysts to lift
its cash rate 25 basis points to 4.75 percent. []
"Maybe it was the high Australian dollar. Maybe all this
talk of quantitative easing abroad," said Brian Redican, a
senior economist at Macquarie, after the RBA held fire. "It's
not clear because the statement actually makes a good case for
going now."
The Australian dollar <AUD=D4> fell 0.9 percent to its
lowest in a week around $0.9575.
Japan's Nikkei share average <.N255>, which had touched a
three-week low in early trade, bounded higher to close up 1.5
percent. []
But MCSI's broadest index of Asian shares outside Japan
<.MIAPJ0000PUS> fell 0.8 percent, with its materials sub-index
<.MIAPJMT00PUS> the biggest drag, down 1.6 percent. Only the
utilities sub-index <.MIAPJUT00PUS> was in positive territory.
European shares had seen a losing streak extend into a
sixth session on Monday. The pan-European FTSEurofirst <>
fell 0.1 percent in early trade on Tuesday, while Britain's
FTSE 100 <>, France's CAC 40 <> and Germany's DAX
<> were up 0.1 percent.
U.S. stocks fell on Monday as investors used middling
economic data and worries about euro zone debt as a reason to
cash in recent gains. The Dow Jones industrial average <>
fell 0.7 percent and the broader S&P 500 <.SPX> 0.8 percent.
Falling resource stocks took their toll on Australia's
benchmark index <>, which fell 0.4 percent, with mining
heavyweights BHP Billiton <BHP.AX> and Rio Tinto <RIO.AX> both
shedding more than 1 percent.
U.S. crude oil futures <CLc1> were little changed around
$81.50 a barrel after easing in the previous session due to a
stronger dollar, which also pushed down copper prices.
A stronger U.S. currency tends to weigh on
dollar-denominated commodities by making them more expensive
for holders of other currencies.
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