Currencies: Dollar rises against yen amid conflicting reports about Japan stimulus

The yen whipsawed against its rivals during Asian trade Wednesday amid changing expectations for soon-to-be released stimulus steps by the Japanese government.

The dollar first gained upside momentum after The Wall Street Journal, quoting people familiar with the matter, reported that Japan was considering issuing 50-year bonds for the first time, the longest maturity of Japanese government debt in the postwar era.

Adding to the upward trend was a local media report that Prime Minister Shinzo Abe would announce details of the stimulus package in the afternoon.

During the lunch break, the greenback USDJPY, +1.07%   quickly gained traction to touch as high as ¥106.54, before trimming earlier gains to change hands at ¥105.56 lunchtime in Tokyo from ¥114.95, while the pound EURGBP, +0.0239%  rose sharply to ¥138.74 from ¥137.39.

Analysts were still trying to assess how much real spending might be included in the stimulus package.

The government’s consideration of the new super-long bonds will likely add to observations that Tokyo’s growth-revival plan is taking on the characteristics of “helicopter money,” especially if the BOJ buys the debt later as part of its campaign to end deflation.

“I don’t think issuance of JGBs with longer duration alone can be interpreted as helicopter money. But it’s highly possible that such an impression will gradually strengthen,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The headline was powerful enough to pull down the yen while some investors were still exiting positions that relied on Tokyo taking strong fiscal and monetary steps in the immediate future.

In other currency pairs, the Australian dollar fluctuated sharply after the release of the nation’s inflation data for the second quarter.

The Australian dollar AUDUSD, -0.3999%   to $0.7485 midday from $0.7501 late Tuesday. Against the yen, the Aussie AUDJPY, +0.65%  to ¥79.02 from ¥78.51.

Australian consumer prices rose in line with street forecast at a tempo of 0.4% growth on quarter and 1.0% growth on year. The Australian currency initially gained but then lost earlier gains on smoldering expectation that the Reserve Bank of Australia will lower interest rates when its board meets next week.

In other currency pair trade, the euro EURUSD, +0.0364%  changing hands at $1.0993 from $1.0987.

The WSJ Dollar Index BUXX, +0.23% a measure of the dollar against a basket of major currencies, was up 0.14% at 87.99.

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