The dollar-won exchange rate is fluctuating as the Bank of Japan (BOJ) hints at the possibility of a change in its ultra-accommodative monetary policy.
BOJ: Japan Interest Rate Decision
As the yen rebounds amid the conclusion of major events such as the Federal Open Market Committee (FOMC) this year, attention is focusing on whether the downside momentum will strengthen around the major big figure (1,300 won).
On the 20th, in the Seoul foreign exchange market, the dollar-won exchange rate fell below 1,300 won, linked to the sharp rise in the yen right after the BOJ announcement. It plunged to 1,285 won during the intraday, lowering the bottom at once.
On this day, the BOJ held a monetary policy decision meeting and announced that it would expand the permissible range of the 10-year Treasury yield target. The range that can change from the existing target value (0%) has been expanded from ±0.25% to ±0.5%. This could push the upper end of Japanese long-term interest rates from 0.25% to 0.5%.
The market reacted immediately and paid attention to the possibility of changes to large-scale easing policies, including the BOJ's yield curve control (YCC). For the first time in about 10 years, the BOJ policy change caused the dollar to weaken against major currencies along with the yen's rebound.
Immediately after the BOJ announcement, the dollar-yen exchange rate plummeted from the 137 yen range to the 133 range.
Some point out that it may not be easy for central banks of major countries, such as the BOJ, to catch up with the pace of interest rate hikes by the Fed. Although the Fed raised its base rate to 5.1% next year, the BOJ kept the deposit rate frozen at minus 0.1% this month.