Yen off 6-week low after "helicopter money" mania shot down

[TOKYO] The yen hovered above six-week lows on Friday after comments from Bank of Japan Governor Haruhiko Kuroda dented speculation Japan may be preparing a radical "helicopter money" economic stimulus.

The yen bounced back to 105.88 yen per dollar from 107.49, its six-week low against the US currency touched on Thursday.

The rebound was triggered by Kuroda's comments on a BBC Radio 4 interview on Thursday playing down the idea of helicopter money, essentially a policy of injecting cash directly to the economy in some form by printing money.

With Prime Minister Shinzo Abe crafting a massive spending package worth about US$190 billion to bolster the economy, some speculators had bet the BOJ could be financing the additional spending - likened by economists to dropping large amounts of cash from a helicopter.

The BBC later said its interview with Mr Kuroda had been conducted in mid-June, helping to cool the yen's gains.

But expectations that the BOJ will adopt easing steps at its policy meeting on Friday next week remained strong, whether those measures fall into the category of "helicopter money" or not, thus limiting the yen's gains.

"Certainly his comments have not dispelled expectations of easing. I suspect a rough consensus in the market is increase in buying of ETFs and Reits as well as 0.10 percentage point cut in interest rates," said Koichi Takamatsu, head of forex at Nomura Securities.

Few market players take Mr Kuroda's words at face value after he introduced negative interest rates in January only days after he said publicly that he was not considering such measures.

A small number of market players, however, think the BOJ may opt to ease later to keep its dwindling fire power.

"I think the BOJ is more likely to ease in November when the government's supplementary budget will be ready, rather than now. I'm not sure if the BOJ feels it needs to act now, when even the Bank of England has not eased," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

The dollar was steadier against other major currencies, with investors still trying to figure out how Britain's decision to leave the European Union will affect the US economy and the policy of the US Federal Reserve.

The dollar index stood at 96.917, off Wednesday's 4-month peak of 97.323.

The euro was moving little against the dollar after the ECB held off on any immediate further easing of monetary policy on Thursday as expected.

The euro traded at US$1.1028, slightly above this week's low of US$1.0980 but little changed from late US levels on Thursday and is also almost flat on the week.

The British pound was also little changed at US$1.3230 .

The New Zealand dollar was on a slippery slope after it had fallen to six-week low on Thursday as New Zealand's central bank said further rate cuts were likely as it sets its sights on the high New Zealand dollar and perilously low inflation.

That cemented expectations for easing at its Aug 11 meeting The kiwi stood at US$0.6982, having fallen to US$0.6952 on Thursday.

REUTERS