Yen surge ends, traders are digesting Bank of Japan’s abrupt policy move

The yen slightly weakened on Wednesday but retained its advance against the dollar seen in yesterday's session. Traders are still confused by the Bank of Japan’s policy tweak. On Tuesday, the central bank raised the range of 10-year Japanese Government Bond yield fluctuations, shifting from its ultra-loose monetary policy. 

The Bank of Japan raised the cap on 10-year Japanese government bond yields to between negative 0.5% and 0.5%. Previously, the range of fluctuations was at negative 0.25% and 0.25%. 

According to Carol Kong, a currency strategist at the Commonwealth Bank of Australia, the currency market is still digesting the bank’s move. 

She noted that investors saw signs of exit from ultra-loose monetary policy, adding that the yen could continue to strengthen in the near-term. 

Goldman Sachs analysts say that the next decision to be made by the Bank of Japan is likely to be decisive. They assume that the central bank may change long-term and short-term rate targets or shift from yield curve control policy.