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SINGAPORE: The yen wobbled after the Bank of Japan on Friday maintained its ultra-low interest rates and dovish stance, while the dollar struggled to hold on to its overnight gains as expectations for a pivot by the Federal Reserve gathered pace.

The yen fell about 0.4% to a session low of 146.90 per dollar in the aftermath of the central bank’s decision, but later reversed the losses to eke out a marginal gain.

It last stood 0.13% higher at 146.10 per dollar.

As widely expected, the BOJ left unchanged its -0.1% target for short-term interest rates and a pledge to guide the 10-year bond yield around 0%, though it raised its inflation forecasts.

“The choppy price action suggests that markets were hoping for a tweak in BOJ’s policies and also reflects the upward revision to the core CPI forecast,” said Christopher Wong, a currency strategist at OCBC.

Elsewhere, the euro attempted to break above parity following a sharp fall of more than 1% overnight, after the European Central Bank raised rates by 75 basis points, as expected, but took a more dovish tone on its rate outlook.

The euro rose to a high of $0.9998, and was last up 0.19% at $0.99835.

Japan’s yen jumps on suspected BOJ intervention, fails to keep gains

The ECB dropped a reference to increasing rates “over the next several meetings” that had been in its September statement, which traders took to mean that a series of large rate hikes was nearing an end.

“The ECB policy decisions were less hawkish than most had expected. Most of the surprise came, really, from the comments from Christine Lagarde saying that the ECB has already made substantial progress in withdrawing policy stimulus,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

Other major currencies were also higher on the day on the back of a softer dollar, which has declined this week on hopes of a potential Fed pivot.

The US dollar index, which measures the greenback against a basket of currencies, and with the euro the most heavily weighted, fell 0.17% to 110.35.

It struggled to sustain its nearly 0.8% gain overnight following the euro’s slide.

Sterling was up 0.06% at $1.1571, and was on track for a more than 2% weekly gain, on optimism that new British Prime Minister Rishi Sunak would offer an antidote to the mess left by his predecessor Liz Truss.

The Aussie gained 0.22% to $0.6468, while the kiwi advanced 0.62% to $0.58655, as both looked set to extend a second straight week of gains.

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