The Yen fell sharply against major currencies in Asian trading on Friday, with the Bank of Japan’s widely anticipated rate hike failing to reverse the currency’s decline.
The Japanese currency slid as much as 0.8% to 157.145 per Dollar, its weakest level since 3rd September. The move came even as the BOJ raised interest rates to their highest level in more than three decades.
The decision was not unanimous, however, with two policymakers voting to leave rates unchanged.
Against the Euro, the Yen weakened 0.8% to 180.32.
The decision clearly fell short of expectations.
One of the most striking aspects was that policymakers could not even agree unanimously, with the split vote adding to market uncertainty, Reuters reports.
The Yen remained under pressure following data released on Friday showing that Japan’s core inflation stayed close to the Bank of Japan’s 2% target in August, pointing to continued price pressures.
Focus now shifts to Governor Kazuo Ueda’s press conference, where he is expected to provide more insight into the central bank’s decision.
Markets will be watching for signs that further policy normalisation remains a possibility, while gauging whether the Bank sees any immediate need for another rate hike.
Furthermore, the British Pound gained 0.1% to $1.3374 after the Bank of England left interest rates unchanged on Thursday and unexpectedly suspended sales of government bonds for six months.
The Euro edged 0.1% higher to $1.1491.
Elsewhere, the Australian Dollar climbed 0.3% to $0.7133 after Reserve Bank of Australia Governor Michele Bullock told lawmakers that inflation risks identified by policymakers appeared to be materialising.
The New Zealand Dollar was also slightly firmer, rising 0.1% to $0.5739.
The US Dollar index, which tracks the greenback against a basket of six major currencies, fell 0.1% to 100.1900.
Markets are narrowly pricing in a rate hike from the Federal Reserve next month, as investors grow increasingly confident in Chair Kevin Warsh’s efforts to reinforce the central bank’s independence from the White House.
Fed funds futures are now pricing in a 53% probability of a 25-basis-point rate hike at the Federal Reserve’s two-day meeting next month, up sharply from 27.2% a week earlier, according to CME Group’s FedWatch tool.