Bank of Japan Boosts Yen

The Bank of Japan shocks markets by tweaking its yield cap, sending the Yen sharply higher and the Japanese stock market plunging.

1. Governor Kuroda of the Bank of Japan earlier announced that the Bank will be amending its yield cap by allowing 10-year bond yields to rise to 0.50%, up from the current limit of 0.25%, approved by unanimous vote. The Bank also committed to massive purchases of Government bonds and other debt instruments while leaving its rate unchanged at -0.10%.
2. The policy action by the Bank of Japan has strongly boosted the Yen, with the USD/JPY currency pair falling to reach a new 4-month low price at ¥133.36 and the Yen gaining against every major currency. Asian equity markets have fallen strongly, with both the HSI and the Nikkei 225 Index down by more than 2% on the day. There is a general atmosphere of risk-off sentiment and fear of impending recession.
3. The release of recent meeting minutes from the Reserve Bank of Australia showed that the RBA last month considered not hiking its interest rate for the first time in 8 months, although it was decided to proceed with the hike as the Bank felt it was so far from bringing inflation down towards its 2% / 3% target level. Analysts see this as increasing the likelihood that the RBA will now pause hiking rates, but analysts still expect two 0.25% hikes in 2023. The release of the minutes help push the Australian Dollar firmly lower, with the AUD/USD currency pair reaching $0.6630.
4. In the Forex market, the strongest major currency is the Japanese Yen, while the weakest major currency is the Australian Dollar.
5. Daily new global coronavirus cases rose last week for the fifth consecutive week.  
6. It is estimated that 68.7% of the world’s population has received at least one dose of a coronavirus vaccination.
7. Total confirmed new coronavirus cases worldwide stand at over 658.3 million with an average case fatality rate of 1.01%.  
8. The rate of new coronavirus infections appears to now be significantly increasing only in Brazil, Guatemala, Honduras, Japan, Mongolia, and New Zealand.