Yen drops then pops on Bank of Japan announcement

Jake Cordell
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Man rifles through Japanese yen
It was a tale of two halves for the Japanese yen after the Bank of Japan meeting this morning (Source: Getty)

The Japanese yen has hits its strongest level since the end of August, just hours after the Bank of Japan announced an imaginative new approach to monetary policy.

The yen initially fell to ¥102.74 against the dollar as the BoJ unveiled its latest package, before gradually strengthening throughout morning trading in London to stand at ¥100.86 against the greenback.

The drop

The BoJ kept its headline policies of negative interest rates and quantitative easing unchanged at its meeting overnight, but the yen still dropped as many saw the new measures as a commitment to run loose monetary policy for a longer time.

The pop

However, it appears traders have taken their time to assess the implications of the BoJ's new tweaks, including the decision to explicitly target long-term government borrowing costs, and its commitment to keep the ¥80 trillion (£601m) money-printing programme running until inflation exceeds two per cent.

Some analysts noted scepticism in the markets over whether the BoJ would be prepared to follow through with enough actions to boost inflation, while others said the movement could be driven more by the dollar, which has also weakened against sterling and is steady against the euro ahead of a crucial US Federal Reserve meeting.

Fawad Razaqzada, market analyst at Forex.com said the yen found "strong support against the dollar as traders took profit no their positions ahead of the Fed meeting."

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