Yen slides, government bonds up on speculation that BOJ could cut rates further
Speculation that the Bank of Japan could effectively start paying banks to borrow its cash caused the yen to tumble on Friday, while U.S. stocks dropped on disappointing earnings reports from some top companies.
Shares of Google’s parent, Alphabet (GOOGL.O), dropped 5.9 percent to $733.81, a day after it missed Wall Street targets for first-quarter profit and revenue, and shares of General Electric (GE.N) also were down following results.
A Bloomberg report that Japan’s central bank might go further with negative interest rates caused the U.S. dollar to hit its highest level against the yen in nearly three weeks, rising more than 1.7 percent to 111.42 yen JPY=.
If the BOJ were to apply its negative rate policy to bank loans, it would allow the central bank to cut its deposit rates deeper into negative territory without acting as a headwind for the nation’s banks, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.
“It gives the Bank of Japan more room to cut rates deeper into negative territory, and that’s what the yen is reacting to,” Esiner said. The Bank of Japan meets next week.
Nasdaq led losses in U.S. stocks, falling more than 1 percent. Microsoft (MSFT.O) was down 7 percent also after it reported results late Thursday.
The Dow Jones industrial average .DJI was down 59.72 points, or 0.33 percent, to 17,922.8, the S&P 500 .SPX had lost 8.58 points, or 0.41 percent, to 2,082.9 and the Nasdaq Composite .IXIC had dropped 68.78 points, or 1.39 percent, to 4,877.10.
The MSCI world stock index .MIWD00000PUS was down 0.5 percent, while European shares .FTEU3 were down 0.5 percent, weighed down by carmakers.
Daimler (DAIGn.DE) said it was investigating its U.S. emissions and PSA Peugeot Citroen (PEUP.PA) said it had been raided by French anti-fraud investigators over its emissions.
