Yen plunges as BOJ sticks to ultra-easy policy
SINGAPORE — The yen dived sharply
against major currencies on Wednesday after the Bank of Japan
maintained ultra-low interest rates, disappointing some
investors who had hoped the central bank would relax its yield
curve control policy further.
The central bank stunned the market last month by raising
its cap on the 10-year yield to 0.5% from 0.25%,
doubling the band it would permit above or below its target of
zero. Since then, speculation had swirled that the BOJ could
tweak its yield curve control (YCC) policy further or even scrap
At a two-day policy meeting, the BOJ kept intact its YCC
targets, set at -0.1% for short-term interest rates and around
0% for the 10-year yield, by a unanimous vote. It also made no
change to its guidance that allows the 10-year bond yield to
move 50 basis points either side of its 0% target.
As a result, the yen suffered broad losses, with the Asian
currency down 2.3 % against the dollar and was set
for its worst day since March 2020.
The euro gained 2% to 141.1 yen and sterling
rose by more than 2% to 160.71 yen. The Australian
dollar gained 2.2% and Singapore dollar
rose 1.9%. The U.S. dollar was last up 2.42% at 131.22 yen.
“The can has been kicked down the road and the attention
will shift to the next meeting,” said Moh Siong Sim, currency
strategist at Bank of Singapore. “It’s a question of when, not
Some investors have been betting the BOJ will be forced to
adjust, or even dismantle, YCC on the view the central bank
cannot sustain the massive volume of bond buying needed to
defend the cap.
On Wednesday, Japanese government bond yields tumbled the
most in a decade, retreating sharply from the central bank’s
0.5% ceiling after the decision. The 10-year yield has
repeatedly breached the ceiling in the past four sessions.
“Speculators are likely to increase their hawkish bets on a
policy shift from the BOJ,” said Anderson Alves, market analyst
“Today’s policy price action shows that the current
framework could fuel another unwelcome plunge for the yen that
could inflate the cost of raw material imports.”
The dollar index, which measures the safe-haven
dollar against six peers, rose 0.42% at 102.810, its biggest
one-day percentage jump since Jan. 5.
Against the U.S. dollar, sterling was last trading
at $1.2281, down 0.06% on the day, while the euro
weakened 0.18% to $1.0769.
The Australian dollar rose mostly flat, while the
kiwi rose 0.30% at $0.645.
Currency bid prices at 0533 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0773 $1.0790 -0.16% +0.54% +1.0799 +1.0767
Dollar/Yen 131.2100 128.1800 +2.40% +0.02% +131.5550 +128.2750
Dollar/Swiss 0.9235 0.9218 +0.13% -0.18% +0.9245 +0.9218
Sterling/Dollar 1.2271 1.2287 -0.14% +1.46% +1.2289 +1.2254
Dollar/Canadian 1.3381 1.3391 -0.06% -1.23% +1.3409 +1.3377
Aussie/Dollar 0.6986 0.6986 +0.06% +2.55% +0.7002 +0.6975
NZ 0.6445 0.6430 +0.23% +1.50% +0.6458 +0.6424
Tokyo Forex market info from BOJ
(Reporting by Ankur Banerjee in Singapore; Editing by Sam
Holmes, Simon Cameron-Moore and Kim Coghill)
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