Dollar’s Roar Has Finally Ended As Bank Of Japan Has Switched Gears On Interest Rates

Dollar’s Roar Has Finally Ended As Bank Of Japan Has Switched Gears On Interest Rates

December 23, 2022 0 By Wiley McDermott

For an extremely long time, the value of the dollar had continued growing against the value of the yen. Whenever the investors looked, the value of the dollar was in the bullish zone against the yen.

40-Year-Old Bull Run Finally Ends

According to the data, the dollar price had been in the bullish zone against the yen for the past 40 years, which equals to 4 long decades.

However, the latest developments in the Japanese economy may have ended the long-running bullish rally of the dollar.

This happened as the Bank of Japan finally decided to make a move in terms of interest rates.

BoJ is No Longer Peaceful

The reason why the dollar kept running a bullish trend against the trading price of the yen was because of the approach of the BoJ.

The central bank of Japan has always been peaceful and never caused any trouble for its locals and the government.

Although central banks from around the world have continued increasing interest rates, the BoJ has never done it at a noticeable rate.

Despite the ups and downs, the Japanese central bank stood its ground against tweaking the interest rates. It was even criticized by many analysts and economists for bringing no change to its strategy.

Even fellow central banks continued criticizing the BoJ, demanding it to become out of the bubble and start taking action against the rising inflation rates.

It seems that the BoJ has finally awakened after 40 years and now, it is going to roar while the rest of the currencies are going to cower.

The BoJ has finally decided to increase the interest rates to fight the rising inflation rates that are becoming troublesome for the Japanese population as well.

The country with one of the strongest economies in the entire world has been forced to join the club of central banks hiking the interest rates.

With the Bank of Japan announcing the hike in interest rates, the entire forex market is extremely shocked.

While most of the investors are still coming out of the shock, a vast majority have already invested in the yen. This has caused the trading price of the dollar to get pushed higher.

Tweaks in the Bond Yield Control

In addition to increasing the interest rates, the BoJ also made a major announcement about making changes to the bond yield control. This way, the central bank has managed to increase the interest rates further.

In addition to fighting the rising inflation rates, the country is also concerned about the costs of the monetary stimulus that have been prolonged.

By making tweaks to the bond yield, they are going to make things easier for the investors in the long run.

The Governor of the Bank of Japan also shared his remarks on making changes to the bond yield. Haruhiko Kuroda stated that their aim was to improve the bond markets and how they work.

By making the necessary changes, they believe they have taken the right measures to control the situation. This way, they will not cause any kind of monetary tightening that the markets would feel.

The Yen’s 4% Surge

The announcement came in at a time when the dollar traders were not ready to fight the yen bulls. As the yen traders came in with full force, they completely annihilated the acquisition power of the dollar investors.

As a result, the value of the yen rose tremendously against the dollar. The data shows that the value of the yen surged by 4% against the value of the dollar in the Friday trading session.

This is the largest one-day gain the yen has recorded against the dollar in the past 24 years. The value of the dollar plummeted by 3.9% against the yen, pushing the yen up to 131.60 yen against the dollar.