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14/06/24
207
JPY Pares Losses as BOJ Keeps Rates Steady
On Friday, the Japanese yen lost sharply earlier but has managed to recover almost completely. USD/JPY traded at about 157.09, up 0.06% in the European session.
The yen dropped as much as 0.80% earlier, falling to 158.25 and reaching a 6-week low before recovering.
On Friday, the Bank of Japan met and remained cautious, disappointing the markets that were expecting more. The BoJ kept interest rates at a range of between 0% and 0.1% and said that it would begin to cut its bond purchases. This move would lower its huge monetary stimulus.
The BoJ however said it wouldn’t provide details of its plans for tapering until the meeting in July, which means that bond buying stays the same for now.
There was disappointment in the markets that the BoJ hadn’t announced a rate hike or at least signaled plans to hike rates. The central bank also indicated that it would move slowly in changing monetary policy. The Japanese yen fell sharply due to the dovish stance of the central bank at the meeting.
The weak Japanese economy may delay any plans by the BoJ to tighten policy. In the first quarter, GDP contracted by -1.8% y/y, and household spending declined by 1.2% m/m in April.
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