LONDON (AFX) - The yen extended its losses against major currencies in midday trade after the Bank of Japan cut the rate on its lending facility to banks and after the release of weak machinery orders data, dealers said.
"There was a lot of yen-selling earlier on, after the rate cut but it's just a sop to the finance minister who would love the BoJ to cut rates," 4Cast forex specialist Paul Bednarczyk said.
"The real bad news for Japan came out with the machinery orders this morning which suggest that any talk of a gradual recovery in the economy look a little bit optimistic to say the least," he said.
The growth in machinery orders shows some sign of slowing, although overall orders remain on the rising trend seen in the previous quarterly assessment in September, a Cabinet Office official said.
GNI currency analyst Mark Henry said investors viewed the BoJ's move as an admission of Japan's economic plight. "The news this morning has been seen as yen-negative across the board but the markets today are quite choppy," he said. Henry said the dollar would probably not rise much further against major currencies ahead of Federal Reserve chairman Alan Greenspan's address to the U.S. congress on Tuesday.
"We would expect that while this news out of Japan is sufficient to put the dollar back on the front foot, if it's to really push ahead we'd probably need some better news from the U.S. The markets will obviously be looking to Greenspan for that next week."
Otherwise, the euro rallied slightly on position-squaring ahead of the weekend, dealers said.
Henry said trading was particularly thin and uninspired. "It's not been the world's greatest of week for data, and today's no exception. We're really struggling -- the BoJ announcement aside -- to find inspiration which makes for thin Friday trading conditions," he said.