Japanese Yen Rallies Despite Signs of Upcoming Monetary Easing from BoJ

The Japanese yen rose today despite a signal from the nation’s central bank that it may ease its already extremely accommodative monetary policy as soon as at October’s meeting. The currency likely got support from the market sentiment that was favorable to safe currencies.
As was widely expected, the Bank of Japan kept its monetary policy unchanged at today’s meeting, leaving the main interest rate at -0.1% and the size of annual asset purchases at Â¥80 trillion. The bank said in the statement that it may consider adjusting its monetary policy in case inflation stops moving towards the 2% target:

Given that, recently, slowdowns in overseas economies have continued to be observed and their downside risks seem to be increasing, the Bank judges that it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost. Taking this situation into account, the Bank will reexamine economic and price developments at the next MPM, when it updates the outlook for economic activity and prices.

Japan’s Ministry of Economy, Trade, and Industry reported that the All Industry Activity Index rose by 0.2% in July following the 0.7% drop in June. Analysts had predicted a bigger increase of 0.4%.
Traders were digesting yesterday’s announcement from the Federal Reserve, contemplating the possibility of the Fed halting interest rate cuts. That hurt riskier currencies, like the Australian and New Zealand dollars, and boosted safe currencies, like the yen and the Swiss franc.
USD/JPY dropped from 108.44 to 108.02 as of 16:07 GMT today, touching the low of 107.79 intraday. EUR/JPY was down from 119.60 to 119.29, and its daily low was at 118.95. GBP/JPY fell from 135.19 to 134.74, reaching the session minimum of 134.25 earlier.

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