Forex - Yen gains sharply after BoJ meeting shows dissent on policy

Investing.com - The yen gained against the dollar on Wednesday as the Bank of Japan kept policy steady, but saw continued dissent to easy policy by one key board member.

USD/JPY changed hands at 119.76, down 0.45%, while AUD/USD traded at 0.7674, up 0.54%.

The Bank of Japan on Wednesday decided by an 8 to 1 vote to leave the bank's policy target unchanged while board member Takahide Kiuchi, who had been opposed to the Oct. 31 easing, called for an even lower stimulative target than the one before the last easing.

Previously, Kiuchi had proposed the BoJ should maintain the high degree of easing only during the two-year period from April 4, 2013 so that it is not overdone. He had also said the policy target before the Oct. 31 easing was "appropriate."

Now that the two-year period is over, Kiuchi proposed that the BoJ should "conduct money market operations and asset purchases so that the monetary base and the amount outstanding of its JGB holdings will increase at an annual pace about ¥45 trillion."

His proposal was again voted down by the rest of the board.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was quoted at 97.82, down 0.43% in Asia.

Overnight, the U.S. dollar rallied by more than 1% against the euro on Tuesday, amid weaker than expected services data in the euro zone and expectations for a delayed interest rate hike by the Federal Reserve.

While the Markit Eurozone Services Business Activity Index increased from 53.7 in February to 54.2 in March, expansion in output still fell below previous estimates of a 54.3 reading. Increases in Germany, Italy and Spain accelerated growth while the United Kingdom's service-sector PMI peaked at 58.9, to reach a multi-month high.

Price discounting throughout the euro zone drove growth on the continent.

Meanwhile, in the U.S. Federal Reserve Bank of Minneapolis president Narayana Kocherlakota said at a speech on Tuesday that the Fed may not need to raise its benchmark Federal Funds Rate until the second half of 2016.

"In light of the outlook for unduly low employment and unduly low inflation, the Fed can be both late and slow in reducing the level of monetary accommodation," Kocherlakota said in a speech to the Chamber of Commerce in Bismarck, N.D.

The comments came in light of a disappointing U.S. jobs report last Friday when the U.S. Bureau of Labor Statistics said in its monthly jobs report that the economy added 126,000 in March, halting a streak of 12 consecutive months of job growth that exceeded 200,000.

The modest job increases nationwide marked the weakest period of hiring in 15 months. In terms of average weekly earnings, employees nationwide received the smallest annual gains in wages since last June.

The labor force participation rate, which measures the number of people who are either employed or actively looking for work, also painted a bleak outlook. During the month of March, the rate ticked down to 62.7%, the lowest level in 36 years.

In mid-March, Federal Reserve chair Janet Yellen indicated that the Fed could begin raising interest rates when it was "reasonably confident" that inflation will move toward its target inflation of 2%. Yellen added that the Fed will take a "data-driven" approach to potential liftoff by keeping a close eye on wage and GDP growth before raising rates.