Yen drops further as Japan stimulus gets underway

By Barbara Kollmeyer and Carla Mozee, MarketWatch

MADRID (MarketWatch) — Japan’s currency on Monday dropped to levels not seen since mid-2009 as the country’s central bank got its massive stimulus program underway.

During early European trading, the U.S. dollar USDJPY +0.4335%  bought 98.65 yen, up from a settlement around ¥97.33 late Friday in North American trade, and well above the dollar’s ¥92.89 level when the Bank of Japan announced new easing steps Thursday.

The yen level marked its lowest against the dollar since June 2009, according to FactSet Research data.

Japanese 10,000 yen.

The yen EURJPY +0.8279%  also extended its fall against the euro, with the shared currency buying ¥128.24, compared with ¥126.66 late Friday.

The yen has been battered in recent sessions in the wake of the Bank of Japan’s plan for aggressive monetary easing.

Analysts said Monday’s bond-buying plan operation went smoothly. Earlier in the day, a report by the Nikkei business daily said the central bank will buy a total of 1.2 trillion yen ($12.3 billion) in Japanese government bonds early this week.

Analysts said financial firms put in bids to sell ¥2.05 trillion in JGBs maturing in five to 10 years — double the ¥1 trillion the bank offered to buy. Financial firms also put in bids to sell more than triple the amount the BOJ said it would buy.

As the yen suffered, shares of Japanese exporters surged in Tokyo trading Monday, and the Nikkei Stock Average JP:NIK +2.80%  closed up nearly 3%, after surging by that amount in opening minutes of trading.

Japan’s two-year easing campaign involves pumping roughly $1.4 trillion into the economy, which has been suffering long-running deflation. The plan includes raising purchases of Japanese government bonds to an annual pace of about ¥50 trillion.

The campaign was launched by newly appointed Bank of Japan Gov. Haruhiko Kuroda, who had pledged to do “whatever it takes” to meet a 2% consumer-inflation goal.

Crédit Agricole said in a report Monday it expects the yen to weaken further against the U.S. dollar.

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Europe Week Ahead: Market reaction will be key

Market reaction to the Bank of Japan’s massive monetary easing and the European Central Bank’s wait-and-see position will be key next week. But China, Bernanke and Alcoa will be very much in focus too.

“Given [the Bank of Japan’s] intention to expand the monetary base considerably over the coming two years, and given the fact that they are now officially trying to reach 2% inflation within the next two years, we see little scope for [the dollar’s rate against the yen] to change its last few month’s uptrend anytime soon,” wrote Crédit Agricole currency strategist Manuel Oliveri.

“This is especially true as there is scope for the [Bank of Japan] to become even more aggressive should inflation not pick up as expected,” he wrote.

The yen failed to benefit against the dollar from Friday’s dismal U.S. monthly jobs report. The Labor Department said U.S. economy created 88,000 jobs in March, falling short of expectations for 190,000 new jobs, according to economists polled by MarketWatch.

In other currency moves Monday, the euro EURUSD +0.3958%  declined against the greenback trading around $1.2991, giving back a portion of its rally on Friday that was spurred by the downbeat U.S. jobs data. The euro rallied as high as $1.3039 on Friday.

The euro was also dented by troubles in Portugal. The European Commission warned in a statement Sunday that failure by Portugal to implement its austerity program would results in the curtailment of future financial aid.

The remarks came after Portugal’s high court struck down some of the austerity measures enacted as part of the nation’s bailout. Portuguese Prime Minister Pedro Passos Coelho said the government would seek other spending cuts to fill the gap left by the ruling.

The ICE dollar index DXY -0.07% , which measures the greenback against a basket of six major rivals, jumped to 82.691 from 82.449 on Friday.

The WSJ Dollar Index XX:BUXX +0.03% , which uses a slightly larger comparison basket, rose to 73.82 from 73.71 on Friday.

Among other majors, the British pound GBPUSD +0.0075%  rose to $1.5332 from $1.5244, and the Australian dollar AUDUSD +0.4410% traded at $1.0379, off from about $1.0417 on Friday.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer. Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.