FX round-up: Yen charges higher on sterling, dollar after BoJ policy

Japan's yen was salient late on Friday, marching up to near three-week highs on the dollar and sterling as Bank of Japan (BoJ) earlier failed to deliver on market expectations for a policy 'bazooka'.

And, the yen may yet have legs to dash higher.

At about 17:12 BST, sterling was down 2.21% to 135.505 yen and the dollar was 2.98% lower at 102.13 yen, both camped out at lows dating back to 11 July. The dollar-spot index was down 1.2% to $95.578

SwissQuote commented that it favoured a long-term bearish bias on the greenback-yen cross, with support at 96.57 yen, the pair having already breached its 103.39 yen support.

"A gradual rise towards the major resistance at 135.15 yen seems absolutely unlikely," SwissQuote said.

BoJ held its interest rates at -0.1%, and said it would up its buys of exchange-traded funds to an annual pace of 6tn yen, from 3.3tn. The central bank also doubled the size of a lending programme for local companies to $24bn.

"Investors were left empty handed during trading on Friday following the BoJ's expansion of monetary stimulus, which fell below market expectations," said FXTM Research analyst Lukman Otunuga.

He summed the yen's appreciation so far on Friday as "ferocious" and said it could be poised for further gains as a combination of risk aversion and diminishing optimism over the BoJ taking any action invited buyers to attack.

"From a technical standpoint, the dollar-yen is turning bearish on the daily time-frame and the breakdown below 104.00 (yen) could open a path towards 101.50 (yen)," Otunuga said.

Against this fabric, gold rose 1.22% to 1357.6 an ounce. The dollar retreated against the loonie, aussie, rand and kiwi, all of these commodity currencies. This was also true for sterling. The cable fell 0.73% to to $1.3260.

"Sterling-dollar continues to move within its channel range," said SwissQuote, noting stronger resistance at $1.3534 and support at $1.3058. "The long-term technical pattern is negative and favours a further decline," it said.

Both sterling and the dollar lost traction against the euro, with figures for gross domestic product (GDP) growth and inflation in the single-currency bloc factors in this story.

The dollar's decline today was, in part, also inked by below-forecast GDP growth figures for second-quarter 2016, with consumer sentiment deteriorating more than expected in July.