For policy makers from Tokyo to Sydney, expanding stimulus has proven to be no guarantee of a weaker currency.
The yen and Aussie are both trading stronger than before the announcement of increased stimulus in Japan and Australia over the past week. Both Bank of Japan Governor Haruhiko Kuroda and Reserve Bank of Australia Governor Glenn Stevenshave indicated that currency strength represents a headwind for their economies.
Part of the problem lies beyond their control: lackluster U.S. growth amid flare ups in geopolitical tension — including the U.K.’s decision to exit the European Union — has persuaded the Federal Reserve to hold off on raising interest rates this year. Futures signal tighter U.S. monetary policy won’t happen until mid-2017.
“The RBA delivered about what was expected, but the Aussie got caught up in the U.S. dollar’s fall,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “Had the BOJ been bolder, the yen would probably have weakened.”
The yen traded at 101.13 per dollar at 10:15 a.m. in Tokyo, 0.2 percent weaker than Wednesday. It had surged 4.3 percent over the previous three days.
Kuroda and his board disappointed investors Friday by leaving bond buying and the negative deposit rate unchanged, even as they increased exchange-traded-fund purchases. That sentiment was compounded after details of fiscal spending released Tuesday showed only 4.6 trillion yen ($45 billion) in extra spending from an overall package worth 28 trillion yen.
The Aussie fell 0.2 percent to 75.93 U.S. cents, following a 1 percent rally on Tuesday, when the RBA cut its key rate by a quarter point to a record 1.5 percent. The rates move was predicted by 20 of 25 economists surveyed by Bloomberg.