The yen is volatile as the BOJ boosts interest rates

31 Jul 2024 , 10:22 AM

The yen was volatile on Wednesday following the carefully watched Bank of Japan (BOJ) decision, which boosted interest rates and announced a strategy to reduce its massive bond-buying program.

Following the BOJ statement, the yen surged as much as 0.8% to a more than three-month high of 151.58 per dollar, but recovered those gains shortly thereafter, closing over 0.3% lower at 153.25.

The central bank announced in a statement that it has upped its short-term interest rate target to 0.25% from 0-0.1% earlier, and that it will reduce asset purchases to three trillion yen ($19.53 billion) per month by the first quarter of 2026.

The yen appeared to be on track for a 5% gain in July, aided by Tokyo’s interventions and the unwinding of short-yen carry trades prior to the BOJ announcement.

Down under, the Australian currency fell to its lowest level since May as core inflation surprised to the downside, reducing the risk of another rate hike.

Wednesday was building up to be a busy day, with investors also expecting inflation data from France and the rest of the eurozone group later in the day, as well as a policy decision from the United States Federal Reserve, which takes centre stage.

Spreading global conflict also put investors on edge.

The Australian dollar was recently down 0.54% at $0.6503, having fallen more than 0.8% to a three-month low of $0.64825 following the release of consumer price index (CPI) data. This left the currency on track for a monthly loss of more than 2%.

Sterling rose 0.12% to $1.2852, aiming for a monthly gain of 1.6%. The New Zealand dollar moved up 0.12% to $0.5910, but was still on course for a 3% decrease for the month.

The dollar index fell 0.07% to 104.37, indicating a 1.4% monthly loss.

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