ING: USD/JPY may fall below 130

The Bank of Japan (BoJ) announced an unexpected change to its yield curve control (YCC) policy. The immediate impact on the yen was significant, with USD/JPY falling more than 3%. Economists at ING report that USDJPY could drop below the 130 level.

BoJ announced a change in its YCC policy. The target band for the 10-year JGB has been extended from the previous +/-0.25% to +/-0.50%. This allows interest rates to rise in the current inflationary environment, despite the fact that the outright target is still 0.00%. JGB's purchase volume also increased from 7.3 trillion yen per month to 9 trillion.

According to ING analysts, risks for the USDJPY currency pair are tilted to the downside into the festive season. However, specialists do not exclude a break below 130 given the dollar's weak environment.