NEW YORK: The yen eased in a choppy session on Wednesday, ceding some of the ground gained the previous day when a surprise policy tweak by the Bank of Japan lifted the Japanese currency by 4% against the dollar. The BOJ decided to change its “yield curve control” policy on Tuesday even as it kept broad policy settings unchanged. It is letting 10-year yields move 50 basis points either side of its 0% target, wider than the previous 25 basis point band.
On Wednesday, the dollar was 0.2% higher against the yen , having plunged 3.8% in the previous session, its largest one day drop against the Japanese currency in 24 years. “I think yesterday’s move was warranted but perhaps a bit outsized so a slight pullback would be natural today,” said John Doyle, vice president of dealing and trading at Monex USA.
Given the size of Tuesday’s move in dollar-yen, traders should expect the pair to be volatile, Doyle said.
Strategists attributed some of the move to poor liquidity ahead of the holidays.
“The yen move was overdone. A lot of people had their fingers burned and with thin liquidity in the holiday season, not a lot of people want to get involved right away,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.
Comments
Comments are closed for this article.