Yen Finds Stronger Footing After Bank Of Japan Concludes Its Meeting On Thursday
The end of this Bank of Japan’s meeting on Thursday had a positive impact on the Japanese Yen’s performance judging by its rally against the US dollar.
The BOJ announced through the meeting that it decided to maintain the -0.1% rate target for the short-term. The Japanese central bank did, however, point out in a statement that it is vital to keep in mind that there is a likelihood of losing the price target momentum. BOJ also noted that it would analyze price and economic developments during the next meeting.
Almost half of the analysts observing the Japanese Yen and the country’s economy speculated that the BOJ would implement easing measures. This is especially in light of the mounting external risks, especially with the slowed global economic conditions. The markets still believe that the BOJ will make changes to Japan’s monetary policy and perhaps even roll out additional stimulus policies in the future.
Meanwhile, Thursday's BOJ meeting seemingly favored the Yen's performance, especially against the US dollar. The Yen’s rally led to a 0.6% decline in the USD/JPY currency exchange rate to the 107.79 level at 03:52 GMT. The Yen’ strength against the US dollar was backed by the dollar’s weaker performance following the Federal Reserve’s decision to lower interest rates from 2-2.25% to 1.75-2%.
The USD/JPY exchange rate performance on Wednesday indicates that the US dollar had the edge over the Yen. This is especially towards the end of the day as the price turned bullish, reaching the day’s high on Wednesday at 108.4800 before ending the session slightly lower at 108.4410.
The USD/JPY currency pair kicked off Thursday’s trading session on bearish momentum. This saw the price drop from the day’s high at 108.4750 to the day’s low at 107.7840 within a few hours. The currency pair exchange rate traded at 107.9990 at the time of this press. This means that there have been slight corrections as dollar attempts to recover some of the lost ground against Yen.
Yen's gain against the dollar is mainly influenced the currency's safe-haven status; rather than a strong backing by the BOJ, especially with the interest rate target. The USD/JPY currency pair is heavily affected by risk appetite.
The Federal Reserve’s decision to slash rate also encouraged traders to respond in favor of the Yen. This is perhaps so that they can be on the safe side by avoiding potential volatility caused by the interest rate changes. Traders tend to switch to the Yen when the market is characterized by higher risk.
The US dollar index also experienced a slight decline by 0.1% after the Fed slashed its interest rates despite it being a move that analysts anticipated.
The BOJ decided to maintain the prevailing rate despite the weak inflation and also the declining exports over the past few months. Japan has been locked in a trade war with South Korea, but that has been dwarfed by the Sino-China trade war. Sales tax hikes are also expected to cause slow domestic demand in October.