Bank Of Japan Keeps Policy Rate Unchanged; Yen Falls

The Japanese Yen (JPY) edged lower as the Bank of Japan kept interest rates at 0% at its meeting on Friday. The Bank of Japan kept interest rates unchanged for the second time in a row at its June meeting, following its first rate hike since 2007 at its March meeting. The central bank opted to reduce bond purchases, aiming to give more flexibility to long-term interest rates. Policymakers intend to finalize plans to reduce bond purchases over the next 1-2 years at the upcoming policy meeting.

The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar against six major currencies, edged higher despite weaker-than-expected economic data released on Thursday. The U.S. Producer Price Index (PPI) softened and initial jobless claims came in higher than expected. However, the dollar’s strength can be attributed to the hawkish stance of the Federal Reserve (Fed).

Policymakers at the Federal Open Market Committee (FOMC) have adjusted their expectations and now expect only one rate cut this year, compared to three cuts forecast in March. This revised expectation suggests that China will take more aggressive measures to manage inflation and maintain economic stability, which contributes to the dollar’s resilience. Investors are awaiting the release of the U.S. Michigan Consumer Confidence Index, which is scheduled for Friday. The index will further reflect consumer confidence and economic outlook.

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