(Updates after UK rate decision)
* Yen off overnight low as hopes fade for drastic BOJ easing
* Sterling just down on the day after BoE meeting
* BOJ, Fed will both hold policy meetings on Sep 20-21
By Patrick Graham
LONDON, Sept 15 The yen inched higher on
Thursday with investors seeking safe havens as stock markets hit
two month lows, although major currency pairs were otherwise
little changed after the first of a batch of major central bank
The Bank of Japan and U.S. Federal Reserve both meet next
week after the Swiss National Bank and the Bank of England both
held fire with any further moves to support growth or weaken
their currencies on Thursday.
The yen move came despite an easing of tensions on bond
markets which have dominated the past week. Traders said sales
of emerging market currencies by CTAs - largely model-based
quantitative funds - continued to dominate trading by the bigger
"Despite yesterday's stability in global bonds, FX seems to
be trading risk-off," said Richard Benson, co-head of portfolio
management at London-based currency fund Millennium Global.
"The problem with CTA money is that they are model-based so
once they flick a switch it can go on for days. Clearly they had
large exposures in emerging FX and that has been unwinding."
Concerns about the policy effectiveness of the world's major
central banks have triggered a steepening trend in bond yields
since last Thursday and the yen's gains also looked like a vote
against the Bank of Japan's ability to weaken the currency.
Sterling inched down marginally after the Bank of England's
decision. The minutes from the meeting were read as showing
officials slightly less pessimistic on the outlook for the
economy than they were a month ago, adding to support for the
pound at around $1.32.
Sources familiar with the Bank of Japan's thinking said the
central bank will consider making negative interest rates the
focus of its future easing by shifting its prime policy target
to interest rates from base money.
There is no consensus in the BOJ yet on whether to deepen
negative rates at the Sept. 20-21 meeting, when it conducts the
comprehensive assessment of its policies, the sources said.
"They are just running out of firepower and everyone knows
it," said the head of currency and fixed income trading at one
major U.S. asset manager in London, asking not to be named.
"I am a 95 yen (per dollar) man."
The dollar edged down 0.2 percent to 102.24 yen,
moving away from a one-week high of 103.35 yen touched
"I was a bit surprised yesterday. I thought the yen might
have been a little stronger, due to the risk-off mood," said
Masashi Murata, currency strategist for Brown Brothers Harriman
"But maybe the BOJ news had an effect. It's hard to say what
will happen next week," he said.
The Fed also meets on Sept. 20-21, and contrasting comments
from U.S. policymakers have led to uncertainty about the
While U.S. interest rate futures indicate expectations for
an actual rate increase next week remain low, the dollar could
get a lift from anything in the Fed's statement that hints at a
hike this year.
The euro edged down slightly to $1.1242, and also
slipped 0.2 percent against its Japanese counterpart to 114.98
The dollar index, which tracks the U.S. unit against a
basket of six major rivals, was a touch higher at 95.508,
after wobbling in a narrow range this week between a low of
94.935 on Monday and a high of 95.672 on Tuesday.
Sterling dipped 0.2 percent to $1.3218, having hit a
two-week low of $1.3139 hit overnight, as investors awaited a
Bank of England policy decision. An appearance by Mark Carney
and colleagues in parliament last week suggested the Bank would
look through an improvement in some economic data which has
given the pound support since it cut interest rates to record
lows and reintroduced an asset-purchase programme in August.
Switzerland's central bank on Thursday held its negative
interest rates at record low levels despite mounting criticism
that the policy has hurt banks and pensions.
(Additional reporting by Lisa Twaronite in Tokyo; Editing by
Toby Chopra and Alexander Smith)