The yen dropped to a new one-year low against the dollar
The yen slipped across the board and reached a 15-year low against the euro on Tuesday after the Bank of Japan’s move to loosen monetary policy was seen as insufficient, while global stock indexes increased a day before the Federal Reserve meets to decide on interest rates.
The Bank of Japan eased its grip on long-term rates by further loosening its bond yield control policy (YCC) on what analysts viewed as a small and inadequate step.
Traders focused on the BOJ’s dovish pledge to “patiently” maintain accommodative policy, and forecast inflation to slow below 2% in 2025.
The yen dropped to a new one-year low against the dollar. The dollar was last up 1.7% at 151.56 yen.
The euro climbed against the Japanese currency to a 15-year peak of 160.84 yen, and was last up 1.3% at 160.20 yen.
Currency traders unquestionably have their knives out for the yen after last night’s dangerously-ambiguous policy change from the BoJ, said Karl Schamotta, chief market strategist at Corpay in Toronto.
With major unknowns remaining around the bank’s reaction function, and another raft of stronger-than-expected data helping boost U.S. yields, rate differentials are tilting more aggressively against the yen as the session unfolds, Schamotta said.
Investors are waiting to see what the Federal Reserve says after a two-day policy meeting ends on Wednesday. They were weighing the possibility that the Fed will hold rates higher for longer.
On Wall Street, investors also digested a mixed batch of earnings reports. Heavy-machinery maker Caterpillar dropped as dealer inventories increased and a large order backlog reduced, suggesting demand is slowing.
Pfizer’s shares were flat after the drugmaker reported its first quarterly loss since 2019.
The Dow Jones Industrial Average added 123.91 points, or 0.38%, to 33,052.87, the S&P 500 advanced 26.98 points, or 0.65%, to 4,193.8 and the Nasdaq Composite gained 61.76 points, or 0.48%, to 12,851.24.
All three major U.S. indexes dropped for the month, and the S&P 500 registered its third consecutive monthly loss in its longest losing streak since March 2020.