Yen dips to 156 level vs dollar in volatile trading after BOJ meeting

TOKYO (Kyodo) — The yen sank to the upper 156 level against the U.S. dollar Friday in Tokyo, with fears of intervention by Japanese authorities allowing the U.S. currency to briefly drop roughly two yen after the Bank of Japan left unchanged its current monetary easing policy.

At 5 p.m., the dollar fetched 156.70-71 yen compared with 155.59-69 yen in New York and 155.62-64 yen in Tokyo at 5 p.m. Thursday.

The euro was quoted at $1.0729-0730 and 168.13-17 yen against $1.0725-0735 and 166.94-167.04 yen in New York and $1.0720-0721 and 166.83-87 yen in Tokyo late Thursday afternoon.

The yen dropped to as low as 156.82, a new 34-year low, from around the mid-155 zone after the BOJ decided to leave its monetary policy unchanged at the end of a two-day policy board Friday.

But market caution about the prospect that financial authorities may step in sparked active buying of the Japanese currency at one point, sending the dollar down by nearly two yen in the space of several minutes to the upper 154 yen zone, dealers said.

Still, the dollar quickly rallied back to the upper 156 yen range as the sudden and sharp drop provided a good opportunity to snap up the U.S. currency, they added.

Investors are now focused on a two-day Federal Reserve monetary policy meeting slated for next week to gauge when the U.S. central bank may decide to cut interest rates.

The BOJ Policy Board decided to continue guiding short-term interest rates in a range of zero and 0.1 percent, in a widely expected move a month after it went ahead with its first hike in 17 years. It also made no change to its government bond buying.

The market’s latest reaction came after speculation emerged that the BOJ could reduce bond purchases following a news report that the bank was considering ways to taper its bond buying at the policy meeting.

“There was speculation that some policy adjustment might be announced to curb the yen’s depreciation, but the outcome disappointed some investors and resulted in yen selling,” said Takuya Kanda, senior researcher at the Gaitame.com Research Institute.

The Nikkei stock index briefly climbed nearly 500 points as the central bank hinted accommodative monetary conditions are likely to continue for the time being, providing a sense of relief in the stock market, brokers said.

The 225-issue Nikkei Stock Average ended up 306.28 points, or 0.81 percent, from Thursday at 37,934.76. The broader Topix index finished 22.95 points, or 0.86 percent, higher at 2,686.48.

On the top-tier Prime Market, gainers were led by marine transportation, real estate and pharmaceutical issues.

Heavyweight semiconductor-related issues were bought back after the previous day’s plunge and financial issues rose after higher Japanese government yields raised the prospect of improved profits.

Japan’s benchmark 10-year government bond yield rose 0.030 percentage point from Thursday’s close to 0.920 percent after rising to as high as 0.930 percent, its highest level since November, on expectations that the BOJ would taper its bond-buying operations.