By Stanley White
TOKYO (Reuters) - The yen held its ground on Monday after the Bank of Japan removed limits on its government bond purchases and increased corporate debt buying to help companies hit by the coronavirus crisis.
The BOJ's decision was widely in line with expectations, so traders instead shifted their focus to a U.S. Federal Reserve meeting ending Wednesday and a European Central Bank (ECB) meeting Thursday as major central banks once again take the stage as the global economy battles against a deep depression.
The Fed has already announced a raft of measures and is expected to stay on hold this week, which is unlikely to trouble the dollar, analysts say.
The stakes are higher for the euro, because the ECB is likely to extend its debt purchases to include junk bonds, and some investors are worried this decision could widen rifts between members of the European Union.
"It will be difficult for markets to latch onto the BOJ, because it has already reached the limit of what it can do," said Takuya Kanda, general manager of the research department at Gaitame.com Research Institute in Tokyo.
"Every economy is suffering and all major central banks have already eased policy a lot, so it's difficult to differentiate from one currency to the next."
The yen
Against the euro, the yen (EURJPY=) traded at 116.30, close to its strongest in three years against the common currency.
The BOJ previously had a loose pledge to buy government debt so holdings increase by around 80 trillion yen ($745.30 billion) a year.
The BOJ's decision to remove this guidance at a policy meeting on Monday was largely symbolic, because actual bond buying has slowed to an annual pace of less than 20 trillion yen due to the central bank's outsized presence in the market.
The BOJ also said it would increase purchases of corporate bonds and commercial paper as companies struggle with lost revenue.
Japan, like most major economies, has urged businesses to close and encouraged people to stay at home to slow coronavirus infections, which is causing a widespread downturn.
The antipodean currencies were buoyed as investors acknowledged the success both countries have had in emerging from the coronavirus pandemic.
The Australian dollar
The New Zealand dollar
The Aussie (AUDJPY=) and kiwi (NZDJPY=) also managed to gain against the Japanese currency.
In Europe and the United States, officials are now moving to ease some of these restrictions, but currency traders say they remain wary because threats posed by the virus have not been eliminated completely.
The dollar has risen in recent weeks due to a dollar funding crunch and safe-haven inflows, but some analysts say the greenback is likely to fall in the long term because the Fed has eased monetary policy more aggressively than other central banks.
Positioning in currency futures may give dollar bulls some reason to turn cautious.
Speculators' net bearish bets on the U.S. dollar rose to the highest in nearly two years in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data.
The euro (EUR=EBS) was little changed at $1.0834 in Asia on Monday. Against the pound (EURGBP=), the euro traded at 87.34 pence.
The ECB is under more pressure to act after EU policymakers last week failed to reach a consensus on the details of a 1 trillion euro emergency fund.
The pound
Johnson is due back at work on Monday after recovering from COVID-19, the illness caused by the coronavirus.
However, there is a lot of uncertainty about the virus testing regime in Britain and the strategy for exiting from lockdown.