• Wednesday, July 24, 2024
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BOJ’s move sends Yen to fresh low, markets await RBA’s call

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The yen’s value dropped to a three-week low on Tuesday, as traders considered the Bank of Japan’s recent adjustments to its yield curve control policy. The Australian dollar was also weak ahead of the Reserve Bank of Australia’s policy decision.

Last Friday, the Bank of Japan took a step towards gradually reducing its massive monetary stimulus. They announced that they would buy 10-year Japanese government bonds at a fixed rate of 1.0 percent, instead of the previous 0.5 percent. This move caused the yen to fluctuate wildly.

The yen touched a low of 142.80 per dollar and settled at 142.66 per dollar, down 0.26 percent. Japan’s benchmark 10-year government bond yield reached a nine-year high, prompting the central bank to conduct additional purchases to limit the rise.

Read also: Japanese yen set for first monthly gain since March 

Experts believe that the Bank of Japan’s slight policy changes may signal a shift in its yield curve control target in 2023. They expect the bank to be more flexible in the coming months.

Investors are also keeping an eye on the Reserve Bank of Australia’s policy decision. While most expect interest rates to remain unchanged, some economists predict a hike due to concerns about inflation. The Australian dollar slightly eased to $0.672.

On the other hand, U.S. banks reported tighter credit standards and weaker loan demand in the second quarter, according to data from the Federal Reserve’s Senior Loan Officer Opinion Survey. This indicates that rising interest rates are affecting the economy.

The U.S. dollar slightly rose against a basket of currencies, reaching a three-week high. Sterling fell to $1.2827, and the euro declined to $1.0986. The New Zealand dollar also eased to $0.620.

All eyes are on the Bank of England’s policy meeting on Thursday, with expectations divided between a 25- and 50-basis-point increase in interest rates.