Dollar Steady, Yen Pressured Amid BOJ Policy Shift
The US dollar held steady on Tuesday, causing Asian currencies to trade mixed. The Japanese yen remained under pressure as investors assessed the Bank of Japan's recent policy shift and the prospect of further rate increases.
The BOJ's September rate decision saw two board members dissenting, with markets disappointed by the reluctance to signal a faster pace of tightening. Chang Wei Liang, DBS FX & Credit Strategist, notes that the yen remains significantly undervalued despite earlier joint US-Japan interventions and the BOJ's 25-basis-point rate hike.
The yen weakened after the policy announcement before stabilizing when Japanese authorities conducted a rate check, a step often viewed as a precursor to foreign-exchange intervention. Japan has significant capacity to intervene, with around $1 trillion in foreign-exchange reserves accumulated while previously working to curb yen strength.