NEW YORK: The Japanese yen fell against the US dollar on Tuesday in volatile trading after the Bank of Japan maintained its ultra-easy policy and signaled an April exit from negative interest rates.
The dollar index rose to a six-week high of 103.76 , and was last at 103.73, up 0.3%.
The BOJ kept short- and long-term rate targets unchanged, signaling the bank plans to normalize policy soon.
“The details of the BoJ communication shows they’re getting more comfortable with the idea that inflation is on track towards their target,” said Vassili Serebriakov, FX strategist, at UBS in New York.
“It did reinforce expectations of policy normalization in April. But it’s less clear if it would be a significant event for the yen because it’s widely expected,” he added.
The yen first weakened after the BOJ decision, with the dollar hitting 148.60 yen. It briefly firmed but by late morning was weaker again with the dollar up 0.2% at 148.43 yen.
The yen is sensitive to the difference in rates between Japan and other markets, and has shed nearly 5% against the dollar this year as markets reduced bets on imminent U.S rate cuts.
BOJ Governor Kazuo Ueda gave no hints on whether the bank would pull short-term Japanese rates out of negative territory at meetings in March or April, as many economists expect. He did say it looked more likely Japan could achieve the bank’s 2% inflation target sustainably.
Elsewhere, the US dollar continued to benefit from declining expectations of a rate cut at the Federal Reserve’s March meeting.
The euro fell to a six-week low of $1.0822, and last traded down 0.5% at $1.0833.
European investors digested a survey of euro zone banks for evidence of the extent to which monetary policy tightening has been passed onto the economy.
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