SINGAPORE- The yen fell on Wednesday after the Bank of Japan kept interest rates unchanged as widely expected, while the dollar struggled to regain some lost ground ahead of the Federal Reserve’s policy decision later in the day.
The BOJ on Wednesday maintained its short-term interest rate target at 0.5 percent, underscoring policymakers’ preference to spend more time gauging how mounting global economic risks from higher US tariffs could affect Japan’s fragile recovery.
The yen swung between losses and gains shortly after the decision, though later traded decisively lower. It last edged down 0.2 percent to 149.56 per dollar
“The decision to leave monetary policy unchanged itself is not a surprise, so its impact on exchange rates is limited. However, the earlier-than-usual timing of the announcement seems to have led financial markets to initially interpret that the BOJ (did not consider) bringing forward a rate hike,” said Hirofumi Suzuki, chief FX strategist at SMBC.
Focus now turns to BOJ Governor Kazuo Ueda’s post-meeting briefing later in the day for clues on how soon the central bank could next raise rates.
“It is expected that he will once again emphasize that as wage trends remain aligned with the BOJ’s economic outlook – essentially ‘on track’ – the policy rate will be raised gradually,” Suzuki said.
In the broader market, currency moves were largely subdued as traders were hesitant to take on fresh positions ahead of the conclusion of the Fed’s March policy meeting later on Wednesday.
