SINGAPORE- The yen fell on Tuesday after the Bank of Japan (BOJ) ended its negative interest rate policy in a monumental but highly anticipated decision, while the Australian dollar also slid after its central bank kept rates steady.
The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy at the conclusion of its two-day policy meeting, making a historic shift away from decades of massive monetary stimulus.
Still, the yen slid more than 0.5 percent against the dollar in a knee-jerk reaction following the move, which had already been priced in by investors prior to Tuesday’s decision.
The euro similarly jumped 0.44 percent against the yen while sterling rose 0.32 percent to 190.52 yen
“It’s a classic ‘buy the rumor, sell the fact’. I don’t think the BOJ was going for the shock and awe approach this time,” said Bart Wakabayashi, Tokyo branch manager at State Street.
The BOJ also said on Tuesday it will reduce the amount of government bonds it will purchase after ending its negative interest rate policy and abolishing yield curve control, while also discontinuing purchases of exchange-traded funds and Japanese real estate investment trusts.
Down Under, the Australian dollar extended its decline after the Reserve Bank of Australia (RBA) left rates unchanged, as expected, but watered down its tightening bias.
The Antipodean currency fell more than 0.4 percent in the wake of the decision to a session low of $0.65325.
“Holding policy rates steady and policy guidance broadly unchanged seems like a reasonably straightforward decision in the presence of high uncertainty,” said Carl Ang, fixed income research analyst at MFS Investment Management.
The RBA said in a statement that the “path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out”.