Japanese currency of yen fell sharply on Tuesday after the Bank of Japan (BOJ) decided to end its negative interest rate policy, as reported by Reuters. The Australian dollar also declined as domestic rates remained unchanged.
The BOJ made a significant decision to end eight years of negative interest rates and other unconventional policies at the end of a two-day meeting, according to the report.
Despite this, the yen dropped by 0.8 per cent against the dollar, falling below 150. It also weakened against the euro, declining by over 0.7 per cent to a three-week low, the report added.
The central bank announced its first interest rate hike in 17 years, setting the overnight call rate at a range of zero to 0.1 per cent.
This decision is expected to keep financial conditions accommodative in the near future, putting pressure on the yen due to the interest rate differentials between Japan and the United States.
According to Bart Wakabayashi, Tokyo branch manager at State Street, the market reaction was in line with expectations, with investors already factoring in the policy shift.
The Federal Reserve’s influence on the dollar/yen exchange rate is likely to overshadow the impact of the Bank of Japan’s decisions.
(1 dollar = 150.28 Japanese yen)
(1 euro = 163.22 Japanese yen)
