Daily Report: Yen Firm As BOJ Maintains Policies

Yen stays firm after BoJ left policies unchanged at widely expected. Interest rate was held at near zero level while BoJ also maintained the pledge to expand the monetary base by JPY 60T to 70T a year. The increase in monetary base would be mostly through increase in government bond holdings by JPY 50T per annum. The accompanying statement noted that the economy is "starting to recover moderately" and "inflation expectations appear to be rising on the whole". Board member Kiuchi continued to propose to drop the two year inflation target and named is as a "medium- to long-term" target but was voted down 8-1. Overall, the statement gave no suggestion that BoJ would expand the policy stimulus in near term.

Elsewhere, Asia equities are lifted by China trade data. Trade surplus narrowed to USD 17.8b in July. Exports rose 5.1% yoy, reversing the -3.1% yoy fall in June. Imports rose 10.9% yoy, also reversed the -0.7% yoy fall in June and -0.3% fall in May. The jump in imports were higher than market expectations and provided some evidence that the slowdown in China's economy has bottomed out. The data also raised hope that the economy would re-accelerate in the second half of the year.

Australia dollar was supported by the Chinese data and shrugged off its own weak employment data. The job market unexpectedly contracted by -10.2k in July while unemployment rate was unchanged at 5.7%. Aussie extended the recovery since the less dovish than expected RBA statement earlier this week, which suggested a more neutral monetary policy stance. AUD/USD is back above 0.9 level while EUR/AUD broke 1.4710 minor support to confirm short term topping.

Looking ahead, Swiss unemployment, German trade balance and ECB monthly report will be released in European session. Canada will release new housing price index while US will release jobless claims.