The Japanese yen rose during Tuesday’s trading session after the Bank of Japan (BOJ) decided to keep its monetary policy unchanged and raised growth forecasts for the first time in a year.
As of 07:32 GMT, the Japanese yen rose against the U.S dollar by 0.17 percent at 110.00, where the USDJPY retreated from the peak of 110.29 recorded on January 17, the highest since May last year.
The rise in the Japanese yen came after the BOJ kept its short-term interest rate at -0.1 percent in line with expectations and pledged to maintain its long-term yield curve policy.
Also, the BOJ raised its forecast for economic growth for the fiscal year of 2019 through March to 0.8 percent this fiscal year, up from 0.6 percent estimated issued three months ago.
The BOJ attributed the rise in growth projections to the rise in optimism after the signing of the US-China trade agreement.
“Progress in U.S.-China trade talks and Brexit have led to an improvement in risk sentiment, pushing up stock prices and long-term rates in many countries,” said BOJ Governor Haruhiko Kuroda at his post-meeting news conference.
Regarding prices, the BOJ lowered its inflation forecast for the current fiscal year, with the consumer price index expected to rise by only one percent and not 1.1 percent as expected in October.
The drive toward reaching the inflation goal "is maintained but is not yet sufficiently firm," the BOJ also noted.
Additionally, the spread of a pneumonia-like virus in China has led to a sudden bout of risk aversion in the markets and prompted investors to divert liquidity to safe havens, including the Japanese yen.
Meanwhile, the dollar
index, which measures the performance of six major currencies against the US
dollar, surged 0.01 percent at 97.37.