Yen Falls on BOJ Low Rates Policy

The Japanese currency fell today versus the 6 main traded currencies in foreign-exchange markets after the nation’s financial authority followed the global trend among wealthy nations and ruled out rate hikes for the short-term future, declining attractiveness for the Asian currency.

After statements this week in the U.S. and the Eurozone affirming that interest rates will be maintained at very low levels for an extended period of time, this time, in Japan, the national central bank declared that interest rates are likely to remain at the current levels since inflation in the country still did not meet the targets which could provide grounds for a more hawkish monetary policy. The yen dropped versus all of the 16 main traded currencies, and still remains as the first option to fund carry trades, when an investors borrows money at a low cost to inject the capital in higher-yielding positions overseas.

The Bank of Japan position following the European Central Bank and the Federal Reserve regarding borrowing costs is certainly affecting the yen’s outlook, according to analysts. Even if such statements don’t show up as a big surprise, the reaction on the yen charts was obviously negative.

USD/JPY traded at 90.38 from an intraday rate of 89.94. EUR/JPY rose to 129.59 from 129.20.

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