Image: Reuters Berita 24 English - The Japanese yen fell against the dollar on Friday after the Bank of Japan defied expectations and maint...
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| Image: Reuters |
Berita 24 English - The Japanese yen fell against the dollar on Friday after the Bank of Japan defied expectations and maintained its ultra-accommodative stance, escalating volatility in currency markets already roiled by a spate of rate hikes this week.
One of the largest runs of monetary policy tightening in decades has roiled currency markets, with the Federal Reserve's three-quarter-point rate hike, its biggest since 1995, and the Swiss National Bank's surprise decision to lift rates by 50 basis points.
On Friday, Japan's central bank went against the tide, maintaining its policy settings and threatening to preserve its 0.25 percent bond yield limitation with limitless buying.
"Everyone anticipated the BOJ to take action. They didn't, in fact "BK Asset Management's managing director of FX strategy, Boris Schlossberg, stated.
The yen, which had hit a 24-year low of 135.6 per dollar on Wednesday, plummeted in response to the BOJ announcement. The yen was last down 2.09 percent against the dollar, trading at 134.885 yen, and 1.62 percent against the euro.
According to Schlossberg, the 135 level has been a technical resistance point for the yen, and breaking through it would require many shorts of the dollar-yen currency pair to cover their bets, perhaps driving the pair up to 137 or 140.
"I think it will probably force some of these early shorts out of the trade if we start to crawl higher from here," he added.
Yen nears 24-year lows- https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnxozapq/yen%2024%20year%20lows.JPG
The dollar climbed from a one-week low against key peers, reversing a two-day slump following the Fed's 75-basis-point rate hike in mid-week, a move that markets had expected as the Fed works to contain stubbornly rising inflation.
The dollar index, which compares the currency to a basket of six competitors, rose 0.732 percent to 104.64, putting it on track for a weekly gain of approximately 0.4 percent ahead of the US holiday weekend.
"We're witnessing a rebalancing of the market today," said Simon Harvey, Monex Europe's head of FX analysis. "Markets are still adapting to the central bank meetings that took place earlier this week."
The euro was last down 0.53 percent against the dollar, trading at $1.0496.
The Swiss National Bank's surprise decision to raise interest rates by half a percentage point continued to reverberate through markets, with the franc reaching 1.0098 against the euro, its highest level since April 13, as investors bet the SNB would not try to halt the currency's strengthening as it has in the past.
The dollar fell 0.31 percent to 0.9696 francs, giving up earlier gains against the Swiss currency, after plunging the most in seven years against the Swissy in the previous session.
In a research note, strategists at UBS's Global Wealth Management's Chief Investment Office said that "the surprise rate hike in Switzerland, as well as the European Central Bank's announcement that it is working on a tool to prevent the fragmentation of the European bond markets, will help to limit USD strength around current levels."
Sterling fell 0.99 percent to $1.2229, reversing most of its gains after the Bank of England chose to raise interest rates again, albeit by a smaller amount than many market participants had expected, along with a hawkish signal about future policy action.
Currency markets are also dealing with a significant reduction in risk sentiment, which has roiled equity markets.
The Australian dollar, which is highly sensitive to global investor sentiment, plummeted 1.53 percent to just under $0.6938 as Asian stock markets tumbled, while Wall Street nudged higher following a severe selloff on Thursday.
