Fundamental Comment

Yen strengthens as BOJ holds monetary policy, Fed slashes rates

Yen strengthens as BOJ holds monetary policy

The Japanese yen rose against the U.S. dollar on Thursday as the Bank of Japan kept its monetary policy unchanged and the Federal Reserve slashed interest rates.

As of 09:31 GMT, the USD/JPY pair tumbled to a bottom of 108.22, the lowest level since mid-October, after opening the session at 108.795, set for its third straight daily decline.

The BOJ decided on today to continue its ultra-flexible monetary policy as pressure mounts on it to adopt further monetary easing steps.

Policymakers agreed to keep interest rates at minus 0.10 percent, which was expected by market analysts, while also pledged to direct 10-year government bond yields by about 0%, after a 7-2 vote by the central bank’s members.

There could be further monetary policy easing if risks to economic activity increase and inflation rises, the BOJ said.

The BOJ “expects short- and long-term interest rates to remain at present or lower levels as long as needed to pay close attention to the possibility that the momentum toward achieving its price target will be lost."

On the other hand, the US dollar extended its slide against a basket of major currencies, as the Fed opted to cut the interest rates for the third time in a row to 1.75 percent.

Although the Fed hinted that it might temporarily halt interest rate cuts in the coming period, market participants still believe there could be another rate cut in December.

The dollar index slumped more than 0.36 percent to 97.08, while the EURUSD pair added 0.3 percent to hover around 1.1163.

Eyes will focus on tomorrow’s U.S. non-farm payrolls, as it may weigh on the Fed’s monetary decision in the upcoming period.

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