Yen moves in positive territory after BOJ meeting results

The Japanese yen rose in Asian markets on Thursday against a basket of currencies, and moved in positive territory against the US dollar, in an attempt to recover from a three-month low, with relative activity in purchases from low levels.

The rise in the Japanese currency comes after the Bank of Japan kept interest rates steady for the second consecutive meeting, confirming its pledge to continue raising interest rates.

Despite this rise, the Japanese yen is on the verge of recording its biggest monthly loss since 2022 against the US dollar, as a result of the decline in the chances of raising Japanese interest rates for a third time this year, in addition to the pressure resulting from the rise in US bond yields.

Price overview

- Japanese Yen exchange rate today: The dollar fell against the yen by about 0.4% to (152.84¥) from today's opening price of (153.41¥), and recorded a high of (153.62¥).

- Previous performance: On Wednesday, the Japanese yen lost less than 0.1% against the US dollar, its fourth consecutive daily loss, and at the beginning of the week it recorded a three-month low of 153.88 yen per dollar.

The yen's decline reflects political and economic uncertainty after Japan's ruling coalition lost a parliamentary election, raising questions about the political and monetary outlook for Asia's largest economy.

Bank of Japan

In line with expectations, the Bank of Japan decided on Thursday not to make any changes to its current monetary policy tools, leaving interest rates unchanged at a range of 0.25%, the highest since 2008, for the second consecutive meeting. The nine-member committee voted to hold rates steady, awaiting further economic data to assess the need for monetary policy normalization.

In its updated monetary policy statement, the bank expected inflation to move around its 2% target in the coming years, and reiterated its commitment to continue raising borrowing costs if the economy continues its moderate recovery.

Bank of Japan forecasts

- Inflation forecast: The bank expects the overall consumer price index to reach 2.5% in fiscal year 2024, unchanged from the previous forecast. The core index is expected to reach 2.0% in the same year, slightly higher than the July forecast.

- GDP: The bank maintained its GDP forecast for FY24 at 0.6%, and is expected to rise to 1.1% in FY25.

Monthly transactions

During October, which will officially end with today’s settlement, the Japanese yen fell 6.5% against the dollar, its biggest monthly loss since April 2022. Expectations of a Japanese interest rate hike were affected by comments from some central bank officials, as well as the Japanese prime minister, which were less hawkish than expected.

US Market

The yield on the 10-year US Treasury note has risen more than 13% since the beginning of this month, hitting a three-and-a-half-month high of 4.337%, boosting the dollar’s appeal as a safe haven investment. The rise reflects expectations that the Federal Reserve will move toward moderate interest rate cuts in the near future.

Finally, the large gap between long-term yields on US and Japanese bonds has reduced the attractiveness of the Japanese yen as an investment target, negatively affecting its exchange rate.