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 The yen <JPY=> surged almost 3 percent against the dollar, the euro
and sterling in a sharp reaction to the BOJ inaction, putting it on
course for its biggest jump against the greenback since February and
in five years against the two European currencies.
Markets were also readying for one of the biggest bits of data of
the year so far, the U.S. first quarter gross domestic product
reading scheduled for 8:30 a.m. ET (1230 GMT).
Tokyo's Nikkei slumped 3.6 percent, the pan-European FTSEurofirst
300 was down over 1.2 percent and futures markets pointed to Wall
Street losing as much as 0.8 percent when it reopens. [.N]
The BOJ's decision to hold steady in the face of soft global demand
and a sharp rise in the yen was particularly jarring for markets
after media reports ahead of the meeting had said it wanted to go
deeper into negative interest rates.
On the key element of the speculation, applying sub-zero rates to
the BOJ's main bank lending program, governor Haruhiko Kuroda
spelled things out clearly.
"I know such a program is adopted by the ECB (European Central Bank)
... At this stage, we don't have any plans to consider this option.
This wasn't discussed at today's meeting," he said.
For analysts, the combination of the BOJ's sit-and-wait message and
the signal from the Fed on Wednesday that is no rush to raise rates
again, fed a broader shift in sentiment that has been gathering
momentum since the start of the year.
"The market was expecting something from the BOJ and they did not
deliver so the market has basically wiped out all the rally in
dollar/yen," said Societe Generale FX strategist Alvin Tan.
"For the last two to three years the big theme in the market was
monetary divergence. But in the last few months the legs have really
been cut off that... so currencies are all over the place."
The New Zealand dollar also raced up in the currency markets,
rallying almost 2.5 percent after the Reserve Bank of New Zealand (RBNZ)
also wrongfooted traders by skipping a chance to cut rates again.
GOLD SHINES
The latest Reuters poll suggests U.S. first quarter GDP probably
rose at a 0.7 percent annual rate, half the pace of the 1.4 percent
of the final three months of 2015.
Back in Europe, disappointing earnings from plane maker Airbus
and Spain's second biggest bank BBVA as well as a first
quarter loss from Norway's giant sovereign wealth fund, added to
gloom on stocks markets.
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But euro zone consumer confidence and German unemployment readings
came in better than expected and the head of Volkswagen said its
recent sales were a reason for optimism after its emissions scandal.
In bond markets, the flight from the volatility elsewhere and the
growing sense that U.S. rates are staying put for a good while
longer, overcame the Japanese angst to push benchmark Bund and
Treasury yields lower.
In a statement that largely mirrored the one after its last meeting
in March, the Federal Reserve rate-setting committee flagged an
improving U.S. labor market but acknowledged that economic growth
seemed to have slowed.
"The Fed didn't mention June at all, meaning that if they skip that,
it will be September which is close to the election, so we are
talking December now," said Soeren Moerch, head of fixed income
trading at Danske Bank. "That is a very big relief for fixed income
markets."
Commodity markets, meanwhile, were having a remarkably quiet day by
recent standards.
Brent crude barely budged from 2016 highs hit on Wednesday at $47.19
per barrel as U.S. West Texas Intermediate (WTI) hovered at $45.30 a
barrel. Oil has surged 65 percent since mid-January.
Gold reversed overnight losses to climb to $1,255 an ounce,
its highest in a week as traders took advantage of the fall in the
dollar, the shiny stuff's underlying currency.
"The longer the Fed holds off on raising rates, the better for
gold," said HSBC analyst James Steel.
(Additional reporting by John Geddie; Editing by Jeremy Gaunt and
John Stonestreet)
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