Yen supported by the policy adjustment of the BoJ and dollar is declining

The yen rose on Thursday, back towards a four-month peak against the dollar hit this week after a surprise shift by the Bank of Japan on bond yield controls spurred bullish bets for the Japanese currency.

The yen rose by 0.4 percent to 131.99 per dollar. It hit a four-month high of 130.58 on Tuesday after the Bank of Japan decided to allow the 10-year bond yield to move 50 basis points up or down around its target (0 percent) against the previously allowed range (25 basis points).

The dollar, which fell broadly after rising 0.6 percent against the yen in the previous session, was unable to recover the 3.8 percent decline that followed the Bank of Japan’s decision on Tuesday.

The yen settled against the euro at 140.56 yen, while it recorded 159.61 yen against the British pound. The yen was close to its strongest levels against both currencies since late September.

The dollar fell on a rebound in risk appetite after data on Wednesday showed consumer confidence in the United States rose in December to an eight-month high as inflation eased and the labor market maintained its strength.

The dollar index, which measures the value of the greenback against a basket of six currencies including the yen, fell 0.5 percent to 103.75, its lowest level in a week.

The euro rose 0.4 percent to $1.0649 amid support from more European Central Bank policymakers to continue raising interest rates.

The British pound rose 0.2% to $1.2109, partially offsetting Wednesday’s losses when it fell 0.85%.

In Asia, the offshore Chinese yuan rose slightly to 6.9828 per dollar, although the spread of COVID-19 in the country still weighed on sentiment.