The Japanese yen fell against the US dollar on Friday, after the Bank of Japan bucked a wave of tightening and stuck with its ultra-accommodative stance, adding to soaring volatility in a currency markets hit by a series of rate hikes this week.
Currency markets have been roiled by one of the biggest runs of monetary policy tightening in decades, including the US Federal Reserve’s mid-week 0.75 percent rate increase, its biggest since 1995, and the Swiss National Bank’s surprise decision to hike rates by 0.5 percent.
The Bank of Japan (BOJ) went against the current on Friday, keeping all of its policy settings unchanged and vowing to defend its bond yield cap of 0.25 percent with unlimited buying.
The BOJ’s move knocked the yen, which on Wednesday hit a 24-year low of ￥135.6 per US dollar, broadly lower. It closed down 2.11 percent against the greenback at ￥134.96.
“Today we’re seeing a rebalancing of the market. It’s been a very volatile week,” said Simon Harvey, head of FX analysis at Monex Europe. “Markets are still adjusting to the central bank meetings from throughout the week.”
The US dollar rose off a one-week low against major peers, following a two-day slide after the Fed’s mid-week rate increase of 0.75 percent, a move that was anticipated by markets as the Fed attempts to tame stubbornly high inflation.
The US dollar index, which measures the currency against a basket of six rivals, was up 0.98 percent at 104.65, posting a weekly increase of 0.48 percent.
US Treasury yields held at lower levels on Friday after a volatile week that saw yields hit more than 10-year highs on expectations of aggressive rate hikes, and then fall on concerns about how they would affect growth.
The New Taiwan dollar rose against the greenback on Friday, gaining NT$0.015 to close at NT$29.720, but losing 0.46 percent over the week.
The Swiss National Bank’s (SNB) surprise decision to raise rates by 0.5 percent continued to reverberate through markets.
The euro closed down 0.5 percent at US$1.0497 versus the US dollar.
The franc rocketed to a two-month high on Thursday after the rate hike and boosted by a sense among investors that the SNB would not try and stop a strengthening franc as it has in the past.
Giving up earlier gains on Friday, the US dollar lost 0.39 percent to 0.9702 francs, after tumbling the most in seven years overnight.
“The surprise rate hike in Switzerland, as well as the European Central Bank’s announcement that it is working on a tool to prevent the fragmentation of the European bond markets, will help to limit USD strength around current levels,” strategists at UBS’ Global Wealth Management’s Chief Investment Office said in a research note.
Sterling dropped 1.03 percent to US$1.2223, giving back nearly all of its overnight gains from when the Bank of England decided to lift rates again, albeit by less than many in the market had expected, along with a hawkish signal about future policy action.
Additional reporting by CNA, with staff writer
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