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Japanese Yen Strengthens As BoJ Ramps Up Stimulus

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The Japanese yen gained ground against its key counterparts in the Asian session on Monday, as the Bank of Japan abandoned limits on purchases of government bonds and boosted buying of corporate bonds and commercial papers to cushion the economic fallout from the coronavirus pandemic.

The policy board voted 8-1 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank. The bank will purchase Japanese government bonds without setting an upper limit so that the 10-year JGB yields will remain at around zero percent.

The policy board unanimously decided to increase the maximum amount of additional purchases of commercial papers and corporate bonds and raised the upper limit of outstanding holdings to about JPY 20 trillion.

The central bank downgraded its GDP forecast for the fiscal 2020 to -5 percent to -3 percent from the previous projection of +0.8 percent to +1.1 percent.

Further, the inflation outlook for fiscal 2020 was lowered to -0.7 percent to -0.3 percent from +1 percent to +1.1 percent.

The economy is expected to expand in the range of 2.8 percent to 3.9 percent next fiscal year and inflation to average zero to 0.7 percent.

The currency showed mixed performance against its major counterparts on Friday. While it rose against the euro, it held steady against the rest of major trading partners.

The yen appreciated to 107.21 against the greenback, its strongest since April 16. This marked a 0.2 percent rise from Friday's closing value of 107.44. Should the yen gains again, 104.00 is likely found as its next resistance level.

The yen rebounded 0.3 percent to 116.16 against the euro, from a 4-day low of 116.51 seen at 9:30 pm ET. The yen was trading at 116.29 per euro at last week's close. Further rally in the yen may locate resistance around the 112.00 area.

The yen was up 0.3 percent at 110.21 against the Swiss franc, after falling to 110.58 at 9:30 pm ET. The franc-yen pair had finished Friday's trading session at 110.37. Continuation of the yen's upward trading may lead it to a resistance around the 105.00 region.

Having dropped to 76.46 versus the loonie at 10:00 pm ET, the Japanese currency reclaimed some lost ground with the pair trading at 76.23. The yen may possibly challenge resistance around the 73.00 mark.

The yen fell against the pound, as the risk sentiment improved after the BoJ's expansion of monetary stimulus for the second straight month. The currency dropped to a 4-day low of 133.57 versus the pound, down by 0.6 percent from Friday's New York session close of 132.82. The yen is likely to face support around the 140.00 region, if it falls again.

The yen dipped to an 11-year low of 69.38 against the aussie, from last week's closing quote of 68.73. Immediate support for the yen is likely seen around the 72.00 level.

The yen was 0.8 percent weaker against the kiwi, touching a weekly low of 65.14. At Friday's close, the pair was worth 64.62. The yen is seen facing support around the 68.00 mark.

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