The Japanese yen advanced versus the U.S. dollar on Thursday after the
Bank of Japan opted to leave its monetary policy on hold.
The yen traded higher against the green currency at 107.95 after hitting
a high of 107.78, halting its fall over the previous eight sessions.
Japan's central bank has decided to hold monetary policy, in accordance
with expectations, but called for a review of prices and economic developments
more thoroughly at its October meeting. That was few hours of the Federal
Reserve’s interest rate cut by 25 basis points.
The BOJ left its short-term interest rate at -0.1%, the 10-year
government bond yield target at zero and kept the quantitative easing program
at the same current pace of 80 trillion yen per annum.
Seven members within the Central Bank of Japan voted in favor of standing
pat on interest rates amid two members dissenting from the majority.
However, the BOJ said it would review the economy and inflation in the
next session, which begins October 30. In addition, it needs to pay more
attention to the risk of losing momentum towards the inflation target of 2
percent.
Some analysts believe that the BOJ’s firepower has been exhausted, while
the side effects of the stimulus program are piling up.
Finally, the Bank of Japan insists in its statement that it will not
hesitate to add incentives if they do not meet their target of reaching the
inflation rate to 2 percent.
The U.S. dollar gained to a high of 108.47 on Wednesday, the highest
level since August 1, as the Fed Powell’s remarks lowered expectations of
future monetary easing.
Later in the day, U.S. Philly Fed manufacturing index may show a retreat
to 10.9 in September from 16.8 in August.
