BoJ's Dovish Surprise Weighs on Yen as Dollar Gains Upside Momentum
The Bank of Japan's (BoJ) decision to raise its key rate by 25bp to 1.25% has led to a dovish surprise, causing the yen to weaken back to summer levels.
This move is seen as a catch-up with the Federal Reserve's hawkish message from Wednesday, which gave markets a green light to fully price in a potential hike in October if data and energy prices suggest so.
The Fed's dot plot signalled that it plans to hike again this year, making the BoJ's decision even more dovish. As a result, the yen weakened to 157.11 against the dollar, around one yen above its pre-decision level.
The dissent from two BoJ board members, Toichiro Asada and Ayano Sato, points to resistance against further tightening, which could make it harder for the board to reach consensus on another hike this year.