USD/JPY Loses Further Ground as Bank of Japan Hikes Interest Rate to 0.25%

Bank of Japan is now boasting interest rates of 0.25% — the highest level since the global financial crisis of 2008. And the yen goes wild.

• The USD/JPY pair whipsawed aggressively Wednesday as forex traders reacted to the Bank of Japan’s decision to lift its benchmark interest rate to 0.25%. The Japanese central bank also outlined plans to cut its bond buying program, indicating a substantial shift away from its yearslong easy-money policy that has supported the nation’s economic growth.

• The yen rallied against the dollar, with the dollar-yen touching a four-month low of ¥150.09. Volatility is expected to continue throughout the session as traders digest the news and readjust their positions to reflect Japan’s new interest rate — the highest since the global financial crisis in late 2008.

  

• Japan’s decision to raise rates comes hours before the Federal Reserve updates its own benchmark interest rate. Only that, the US central bank is already flexing rates at a 23-year high of 5.50%. What’s more, the Fed is expected to move in the opposite direction soon and loosen its monetary policy by lowering borrowing costs. Fed chair Jay Powell is scheduled to speak later today, shortly after US policymakers vote on the interest rate.