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Yen gains as expectations of Japanese stimulus rebranded

Yen gains as Japanese stimulus expectations dialed back

LONDON (Reuters) – The yen rose more than 1 percent against the dollar and the euro on Tuesday as traders dialed back expectations of how the new authorities of both Japanese stimulus is injected into an economy in crisis.
It is expected that the Bank of Japan to announce the purchase of assets of larger and a rate cut even more negative at the end of its policy meeting on Friday territory.

Meanwhile, the government is compiling a spending package that some sources have estimated could be worth up to 20 billion yen. However, a Nikkei report said on Tuesday that the direct fiscal stimulus in the economy would amount to about 6 Trillion Yen coming years.

“There is some position unwinding going on with investors tone down expectations of how much fiscal stimulus will be provided,” said Yujiro Goto, currency strategist at Nomura.

“We are also seeing not much pressure the Japanese government in the Bank of Japan to ease. All this is helping the yen.”

The dollar fell 1.5 percent against the yen at 104.21, while the euro slipped 1.3 percent to ¥ 114.77 (EURJPY =).
The yen has fallen in recent weeks on expectations that the Japanese authorities offers both fiscal and monetary stimulus to start rising inflation.

Some had been waiting for the money from the helicopter, so the central bank could finance the public debt, although the authorities have denied this is part of their plans.
Finance Minister of Japan, Taro Aso said Tuesday he expects the Bank of Japan to continue making every effort to meet its inflation target of 2 percent and left to the BOJ to decide on measures concrete.
Most economists polled by Reuters expect the BOJ to take some form of easing steps at its two-day meeting that ends on Friday.

STERLING slammed

Sterling fell nearly 2 percent against the yen (GBPJPY =) and reached a 12-day low against the euro (EURGBP = D4) after the Bank of England Martin Weale said he had dropped his opposition to the policy of easing and now favored stimulus righ now ..

The pound also dropped 0.5 percent against the dollar to trade at $ 1.3080

“When the line previously hard member of the BoE MPC Martin Weale becomes pessimistic, participants better than hearing market,” said Hans Redeker, head of currency strategy at Morgan Stanley (NYSE: MS).

Meanwhile, it is expected the Fed to stand firm on the policy at its meeting ending on Wednesday. Fed funds futures on Monday indicated that the market sees almost no chance of a rate hike this week. But the chances of a hike in December rose 56 percent, compared to 48 percent on Friday.

The dollar index, which tracks the currency against a basket of six major rivals, was down 0.3 percent to 97,003 (DXY), down from a peak of 97,569, its highest peak since March.

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