The Yen Has Retreated After The Surge It Experienced Following A BOJ Policy Tweak

The Wednesday session proved to be quite choppy for the Japanese yen as its value ended up falling to a lower level. Due to the bad trading day, the yen ended up losing the gains it had generated a day earlier.

Japanese Central Bank Helped Push Yen’s Price

A day prior to the recent trading session, the value of the yen moved significantly higher. However, it happened following an announcement made by the Bank of Japan (BOJ).

According to the officials at the BOJ, they had decided that they will increase the interest rates in the upcoming month.

With the announcement made by the officials, the investors’ confidence rose in the Japanese yen. This led to the trading price of the Japanese yen moving higher.

The investors were confident in their spending for the Japanese yen, as they did not stop spending on the asset. This caused the trading price of the yen to surge significantly against the dollar.

A look at the data shows that the value of the yen recorded 4% gains against the value of the dollar on Tuesday.

Change to the Yield Curve Control

On Tuesday, the Bank of Japan officials confirmed that they had made changes to the policy for yield curve control. They confirmed that they had not made any changes to the broad policy.

Initially, the Bank of Japan did not want to introduce a single surge when it came to interest rates. However, they decide to increase the 10-year yield a bit.

They reportedly increased it by 50 bps, which was previously expected to be 25 bps. By doing this, the BOJ has moved away from the 0% target it had set for the 10-year yields.

Price of Dollar against the Yen

On Wednesday, the traders were in a state of awe as they saw the trading price of the dollar move higher against the trading price of the yen.

The stats reveal that the trading price of the dollar surged by 0.4% against the yen. It was in the previous session that the trading price of the dollar had suffered a major pullback against the yen.

The report shows that the value of the dollar had plunged 3.8% against the trading price of the yen. In the 24-years, it was the lowest 1-day plunge the trading price of the dollar had hit against the yen.

Comments by John Doyle

The Vice President at Monex USA, a major dealing and trading company in the US, had already made a prediction following a Tuesday surge.

He commented about the Japanese yen and that the particular currency had already hit a very high level against the dollar.

The push that the yen experienced against the trading price of the dollar was already outsized. This meant that in the following trading sessions, the trading price of the yen would end up giving back some of the gains.

This is exactly what happened in the latest trading session as the price of the yen dipped a bit against the dollar.

Doyle further made a prediction that given the price movement of both currencies against each other, he is looking at a volatility trend.

He claimed that the volatility would remain intact between both currencies for a while. So far, Doyle’s predictions have turned out to be true and both currencies are demonstrating volatile behaviors.

Yen to Lose Even More Power

Looking at the recent surge that the yen achieved against the dollar, Doyle has predicted the yen is going to fall even more.

The yen has lost only 0.4% value against the trading price of the dollar, against a 3.8% gain the previous day.

Over the course of days, the liquidity is going to get worse for the Japanese yen against the dollar. The dollar may continue rising until half of the gains the yen has acquired are given back.