BOJ keeps interest rate unchanged

26 Apr 2024 , 04:02 PM

Bank of Japan has kept interest rate unchanged at 0% - 0.10% in its monetary policy meeting today. This caused caused the yen to fall to its lowest level versus the US dollar in thirty years, raising concerns among investors about when and how much Tokyo authorities might step in.

The minutes after the announcement saw the yen decline to 156.1 per dollar, a loss of almost 0.2%. Against the Australian dollar, the yen dropped to its lowest level in over a decade and to its lowest level in almost 16 years at 167.38 per euro.

The Bank of Japan maintained its target range for short-term interest rates at 0-0.1% and forecasted inflation to remain at 2% for the following three years.

Since no policy change was anticipated by the markets, the governor Kazuo Ueda's tone and perspective during his news conference at 3:30 p.m. Tokyo time (0630 GMT) are now the centre of attention.

With the greatest decline of any G10 currency this year, the yen fell 9% vs the dollar. This decline was mostly caused by the enormous difference in government bond yields between the US and Japan, which is over 375 basis points at the 10-year tenor.

Though markets are still on high alert for official purchasing, the yen has fallen past levels at 152 and 155 to the dollar, where traders had been cautious of pushback or intervention from Japan.

Shunichi Suzuki, the finance minister of Japan, stated on Friday that he was keeping a careful eye on changes in currency values and was ready to act decisively if necessary.

While Treasury yields increased in response to a hotter-than-expected inflation index, the dollar had dropped in other places due to weaker-than-expected U.S. growth statistics.

The euro increased by 0.3% on Thursday to reach a two-week high of $1.0728 in response to data indicating that first-quarter GDP in the United States grew at the quickest rate in over two years. The 1.6% annualised rate fell short of 2.4% economist predictions.

The stronger-than-expected inflation number this week has helped the Australian dollar, which briefly surged over its 200-day moving average to hit $0.6539 before tumbling around $0.6522 in Asia trade on Friday.

On Thursday, sterling increased 0.4%, closing at $1.2503. The New Zealand dollar, which has gained over the last four sessions, was slightly stronger in early trade in Asia at $0.5960.

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