(Bloomberg) — The yen weakened past the key level of 155 versus the dollar after the Bank of Japan kept interest rates steady. Japanese stocks fell slightly, but ended the day off their lows.
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The currency slid as much as 0.7% against the greenback to 155.85, a level last seen in November, as Governor Kazuo Ueda spoke in his post-decision press conference. The decline Thursday followed a 0.9% decline in the yen on Wednesday after the Federal Reserve cut interest rates while signaling caution over future rate reductions.
JGB futures fluctuated during the day and were up 15 ticks at 142.29 as of 3:44 p.m. in Tokyo. The relatively modest reaction in markets reflected the expectation that the BOJ would stand pat.
Still, the breach of 155 is significant. It’s closely watched by strategists, who see a slide to this mark as a potential trigger for verbal intervention from Japanese authorities, and added pressure on the BOJ to hike rates sooner rather than later.
“The Fed’s hawkish tilt and BOJ’s pause could bring fresh reasons for yen traders to ‘carry’ on,” said Charu Chanana, chief investment strategist at Saxo Markets.
The decision was largely priced in by overnight index swaps prior to the meeting and predicted by the majority of economists in a Bloomberg survey. Rate hike bets had receded in recent weeks, contributing to a six-day losing streak in the yen through Monday, its longest stretch of declines versus the dollar since June.
BOJ officials saw little cost in waiting before raising interest rates, Bloomberg reported earlier this month, citing people familiar with the matter.
What Bloomberg’s Markets Live Says…
“The yen’s fate is out of the hands of the Bank of Japan, for now. The currency faces more of 2024’s weakness and whiplash — a multi-decade low of 160/USD and a one-year high — until policymakers deliver a bolder signal that policy normalization will resume.”
Mary Nicola, Markets Live strategist at Bloomberg.
Click here to read the full report.
Of note to traders, the BOJ said that the currency is more likely to affect prices than before. And board member Naoki Tamura voted against the stand-pat decision, proposing a rate hike to 0.5% at this gathering.
“There’s some hawkish vibes in the decision — particularly one dissenter in favor of a hike and more signs of wage-price spiral intensifying,” said Chanana. “But it remains unlikely that Ueda can clearly signal a January rate hike given the uncertainties around Fed and Trump presidency.”