Violent Yen Rollercoaster Stuns Traders As BOJ Sends Conflicting Messages, Dow Futures Give Up More Than 80-Point Gain To Turn Lower

In a violent, stop-hunting rollercoaster session, the yen rose, then fell, then rose again, with the USDJPY trading at session lows at 6am ET after the BOJ first released language that was deemed more hawkish than expected, with the central bank reversing its December inflation phrasing from “inflation expectations have remained in a waekened  phase.” to “inflation expectations have been more or less unchanged” in Tuesday’s statement, only to later reverse the move after Governor Haruhiko Kuroda damped speculation policy makers are moving closer to reducing monetary stimulus.
Kuroda also said the central bank must maintain its current monetary easing program as inflation is still distant from its 2 percent target. Earlier the Yen strengthened after the BOJ said inflation expectations had stopped falling, though risks to prices remain “skewed to the downside.”
The move by the BOJ to keep its price and economic forecasts unchanged “suggests that there won’t be any change in policy for some time,” Marshall Gittler, strategist at ACLS Global, wrote in note. “The yen can go back to a weakening trend once speculation about tightening elsewhere heats up.”
The central bank cut purchases of longer-maturity bonds this month, prompting speculation it will allow 10-year yields to rise above its current target of around zero percent. However, during the news conference, Kuroda said that the central bank’s short-term bond operations are dictated by operational factors and don’t imply changes to policy.
And after all the volatility and stop hunts, the Yen was last seen trading at session highs, with the USDJPY back under 110.50.

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