The yen plunged despite the Bank of Japan raising its policy rate to 1.25%, the highest level in 31 years. Markets focused on speculation about intervention by Tokyo and reports that a rate check had been conducted, while warnings from the Federal Reserve and European Central Bank about further rate hikes added to the pressure.
The Bank of Japan raised its policy rate to 1.25%, while the yen plunged as the long-standing mindset favoring monetary easing receded. Markets are focused on the BOJ's messaging and the outlook for interest rates going forward.
Following the decline, reports emerged that BOJ officials had conducted a rate check, heightening speculation about official intervention by Tokyo. Market participants viewed this as a possible precursor to intervention in the foreign exchange market.
Meanwhile, the US Federal Reserve and European Central Bank raised rates this month and warned of the possibility of further tightening to combat inflation stemming from the war in the Middle East. Markets are pricing in a higher probability of a US rate hike in October.
In Europe, the euro was trading near $1.148. Projections that the AfD would become the largest party in a state parliamentary election in northeastern Germany have focused attention on political and economic conditions within the EU as well.