(Updates prices throughout, adds tables, economic data in paragraphs 6, 7 and 8; analyst comments in paragraphs 4, 5, 9 and 10.)
The yen whipsawed in its most volatile trading session in months on Friday after the Bank of Japan made its yield curve control policy more flexible, which investors took as a step towards an eventual shift in its massive stimulus programme.
After chopping and changing direction as traders digested the BOJ decision, the Japanese yen JPY= weakened 0.70% versus the greenback to 140.43 per dollar in early New York trading session.
The BOJ ended its two-day policy meeting on Friday, deciding to keep its short-term interest rate target at -0.1% and that for the 10-year government bond yield around 0%. But at the same time, the central bank said it would offer to buy 10-year Japanese government bonds (JGB) at 1.0% in fixed-rate operations, instead of the previous rate of 0.5%.
"The question is where the Bank of Japan is going? Is this the start of a rate hiking cycle or is this really just a tweak? And there's no signal," said Adam Button, chief currency analyst at ForexLive in Toronto.
"This may be the first step towards a credibility crisis for the Bank of Japan and that is really dangerous. They're on the tightest of tightropes above the pit of alligators. This is the first wobble, and the Bank of Japan cannot afford to lose any of its credibility. I think that's the big reason why we still see so much volatility."
Meanwhile, the dollar fell against a basket of its major peers as investors largely shrugged off new data showing inflation slowing as they continue to sort through multiple central bank decisions this week to understand the outlook for monetary policy.
U.S. annual inflation saw its smallest increase in more than two years in June, with underlying price pressures moderating. If the trend continues, it could push the Federal Reserve closer to ending its fastest interest rate hiking cycle since the 1980s.
Inflation as measured by the personal consumption expenditures (PCE) price index
increased 0.2% last month
after edging up 0.1% in May, the Commerce Department said on Friday. In the 12 months through June, the PCE price index advanced 3.0%. That was the smallest annual gain since March 2021 and followed a 3.8% rise in May.
"The market has largely moved past the inflation story at the moment, and you can see that in today's data," said Button.
"There was a time months ago, when even one or two ticks below the consensus was a major market mover, and today is the best evidence yet that the market isn't overly concerned about inflation."
The dollar index =USD fell 0.138% to 101.530, while the euro EUR= eased up 0.46% to $1.1023.
CENTRAL BANK WEEK Earlier this week, the Fed and the European Central Bank hiked policy rates by 25 basis points, as expected. The ECB raised the possibility of a pause in September as inflation pressures show tentative signs of easing with recession worries mounting, while the Fed on Wednesday, left the door open to more rate hikes, though Fed Chair Jerome Powell gave few hints about the September meeting.
The Fed is having to balance its fight against inflation with an economy that is showing signs of slowing, but is still growing faster than expected and a robust labour market.
Sterling GBP= was last trading at $
1.2854
, up 0.48%. In cryptocurrencies, bitcoin BTC=last rose 1.25% to
$ 29,501.88while Ethereum ETH= ETH=BTSP
last rose 1.15% to
$ 1,879.60. ======================================================== Currency bid prices at 11:11AM (1511 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD101.5300 101.6900 -0.14% -1.894% +102.0400 +101.3300 Euro/Dollar EUR=EBS$1.1024 $1.0976 +0.45% +2.89% +$1.1047 +$1.0944 Dollar/Yen JPY=EBS140.4250 139.5000 +0.67% +7.11% +141.0700 +138.0500 Euro/Yen EURJPY=154.81 153.10 +1.12% +10.34% +155.0600 +151.4300 Dollar/Swiss CHF=EBS0.8684 0.8696 -0.12% -6.07% +0.8736 +0.8662 Sterling/Dollar GBP=D3$1.2855 $1.2795 +0.49% +6.32% +$1.2886 +$1.2767 Dollar/Canadian CAD=D31.3234 1.3225 +0.06% -2.33% +1.3248 +1.3200 Aussie/Dollar AUD=D3$0.6661 $0.6709 -0.71% -2.27% +$0.6713 +$0.6623 Euro/Swiss EURCHF=0.9572 0.9539 +0.35% -3.26% +0.9577 +0.9526 Euro/Sterling EURGBP=0.8574 0.8578 -0.05% -3.06% +0.8589 +0.8550 NZ NZD=D3Dollar/Dollar $0.6160 $0.6182 -0.26% -2.89% +$0.6193 +$0.6121 Dollar/Norway NOK=D310.1800 10.2020 -0.25% +3.69% +10.2330 +10.1470 Euro/Norway EURNOK=11.2234 11.1772 +0.41% +6.95% +11.2325 +11.1556 Dollar/Sweden SEK=10.5228 10.5107 +0.61% +1.11% +10.5885 +10.4769 Euro/Sweden EURSEK=11.6018 11.5312 +0.61% +4.06% +11.6045 +11.5295 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
