As the Bank of Japan (BOJ) commenced its two-day rate-setting meeting, the yen found itself on the weaker side of 155 per dollar, sparking nervousness among traders about the possibility of Tokyo intervening while policy deliberations were still ongoing. The dollar broke above the 155 yen level, reaching a 34-year high of 155.74 yen on Thursday, after trading in a tight range for several days. Market participants viewed the 155 yen level as a significant threshold that might prompt the Japanese government to take action to prop up the yen, leading to intense speculation about potential interventions.
During the BOJ meeting, which focused on monetary policy, the central bank was expected to maintain its short-term interest rate target unchanged. This decision followed a recent exit from negative rates in the previous month. Market analysts anticipated a marginally hawkish hold outcome from the meeting, with little indication of a shift away from the BOJ’s current accommodative financial conditions. Consequently, the yen was not projected to appreciate significantly, despite trading at historically low levels.
Amidst the BOJ meeting and currency speculation, the dollar experienced some losses against other major currencies due to positive business activity data from the euro zone and the UK. The euro and sterling gained ground, with the euro rising by 0.1% to $1.07085 and the sterling remaining relatively steady at $1.24675. The dollar also declined slightly against a basket of currencies, reaching 105.77, before rebounding from a recent two-week low. Trading in Asia was limited due to Australian markets being closed for a holiday.
Impact on Australian and New Zealand Dollars
The Australian dollar saw a modest increase of 0.14% to $0.65065, boosted by diminishing expectations of rate cuts from the Reserve Bank of Australia (RBA) after the country’s consumer price inflation slowed less than anticipated in the first quarter. According to Justin Smirk, a senior economist at Westpac, the RBA was likely to maintain its current interest rate in May, postponing any potential rate cuts to November. Meanwhile, the New Zealand dollar edged up by 0.03% to $0.5937, indicating a relatively stable performance in comparison to other major currencies.
The Bank of Japan meeting had a significant impact on currency markets, with traders closely monitoring developments related to yen intervention and BOJ monetary policy decisions. The market response to positive business activity data in Europe and the UK also influenced the performance of major currencies, such as the euro and sterling, against the dollar. Additionally, the stability of the Australian and New Zealand dollars reflected shifting expectations regarding future interest rate cuts. As global economic conditions continue to evolve, currency markets remain dynamic and responsive to both domestic and international events.