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The U.S. dollar has gained strength against major currencies as the Japanese yen experiences a significant decline following a recent interest rate hike by the Bank of Japan (BOJ). As of 7:45 AM ET, the dollar was up 1.21% against the yen, which has dropped sharply after the BOJ raised its policy rate by 25 basis points to 1.25%, marking its highest level since 1995. Despite this increase, the market was disappointed by the BOJ's lack of clear guidance on future rate hikes, leading to a sell-off in yen positions.
BOJ Governor Kazuo Ueda indicated that future monetary policy decisions would depend on inflation and economic conditions, without signaling an imminent further increase. This uncertainty was reflected in the 7-2 vote among policymakers, with two members expressing concerns about economic growth. The market had anticipated a more hawkish stance, and the absence of such guidance prompted traders to unwind yen-long positions, pushing the USDJPY pair toward the 158.00 level.
In addition to the yen's decline, U.S. Treasury yields have risen, further supporting the dollar. The 10-year Treasury yield is currently at 4.9694%, contributing to the interest rate differential that favors the U.S. dollar over the yen. Meanwhile, U.S. stock futures indicate a positive opening, following gains in major indices the previous day, with the Nasdaq leading the way with a 1.69% increase.
Source: KLEA News