Yen Plunges To 34 Years Low Following BOJ's Decision To Maintain Interest Rates

The yen reached its weakest point against the U.S. dollar in three decades following the Bank of Japan's decision to keep interest rates unchanged on Friday, leaving traders uncertain about potential intervention measures by Tokyo authorities.

Immediately after the announcement, the yen declined by approximately 0.2 per cent weakening to 156.1 per dollar. Additionally, it slid to its weakest level against the euro in almost 16 years, reaching 167.38 per euro and touched its lowest point against the Australian dollar in nearly a decade.

The Bank of Japan opted to maintain its short-term interest rate target at 0-0.1 per cent and projected that inflation would hover around 2 per cent over the next three years.

Given that markets had not anticipated any policy adjustments, the reactions were relatively subdued. Attention now shifts to Governor Kazuo Ueda's tone and outlook during his news conference at 3:30 pm in Tokyo (0630 GMT).

The yen's 9 per cent decline against the dollar this year represents the most significant drop among G10 currencies, primarily driven by the substantial gap between U.S. and Japanese government bond yields, which exceeds 375 basis points at the 10-year tenor.

Despite surpassing levels at 152 and 155 to the dollar, where traders had previously anticipated pushback or intervention from Japan, markets remain vigilant for potential official buying.

Japanese Finance Minister Shunichi Suzuki stated on Friday that he closely monitored currency movements and was prepared to take decisive action in response.

Elsewhere, the dollar experienced a slight dip following softer-than-expected U.S. growth data, despite Treasury yields rising due to a hotter-than-anticipated inflation indicator.

The euro climbed 0.3 per cent to a two-week high of USD 1.0728 on Thursday following reports indicating slower-than-expected U.S. growth in the first quarter. The annualized rate of 1.6 per cent fell short of economist forecasts of 2.4 per cent.

Boosted by a hotter-than-expected inflation reading earlier in the week, the Australian dollar briefly surpassed its 200-day moving average to reach $0.6539 before settling around $0.6522 in Asia trade on Friday.
Sterling advanced by 0.4 per cent on Thursday, reaching USD 1.2503, while the New Zealand dollar saw slight gains in Asia morning trade, reaching USD 0.5960, extending its upward trend from the previous four sessions.