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    Asian Session – Yen firms after Bank of Japan keeps policy unchanged

    The yen was firmer against major currencies today after the Bank of Japan kept its monetary policy unchanged at its latest meeting. The decision comes despite recent data showing industrial production falling for two consecutive months and inflation remaining close to zero. In its statement, the Bank of Japan said that the economy is expected to continue “recovering moderately” but acknowledged that the slowdown in emerging economies has affected Japanese exports and production. Although the majority of analysts were not expecting the BoJ to ease policy in today’s meeting, many see the upcoming October 30 meeting as an opportunity for the Bank to expand its current stimulus program.

    Speaking at a press conference after the meeting, BoJ Governor Haruhiko Kuroda said that the Bank will maintain its expansionary policy until inflation has hit the 2% target but the timing of how quickly this is achieved depends on oil prices.

    The dollar dropped to 119.75 yen after the decision, having traded around 120.33 yen before the announcement, but soon bounced back to around 120 yen. The euro and the pound also both plunged against the Japanese currency and were trading at 135.12 and 182.99 respectively in late Asian session.

    German industrial production figures out at the start of European trading echoed yesterday’s poor factory orders data. Industrial production in Germany fell by 1.2% month-on-month in August, against expectations of a 0.2% rise. This compares with an upwardly revised figure of 1.2% in the previous month.

    The data had limited impact on the euro, which was headed lower before the data came out. The single currency was down to 1.1254 against the dollar in late Asian session, having reached a high of 1.1283 dollars in early trading. Against the pound, the euro was lower at 0.7381. The pound rose against the dollar ahead of the start of the Bank of England’s 2-day monetary policy meeting. Cable was trading at a 1½-week high of 1.5250.

    The Australian dollar extended its gains today following yesterday’s decision by the RBA to keep rates on hold. The aussie rose to 0.7194 against the greenback as higher commodity prices provided additional support for the currency. The New Zealand dollar rose sharply on stronger global dairy prices. The kiwi climbed to 0.6600 against the dollar in late Asian session, its highest level since August 24.

    Oil prices rose for a fourth day on expectations that Russia and OPEC may cut production. WTI oil futures were 2.3% higher today at $49.65.

    The rest of the day is expected to be relatively quiet with the only major data coming out of the UK in the form of August manufacturing and industrial production numbers. The data will be closely watched as the Bank of England meets for its October meeting with the minutes to be published tomorrow.

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