On Wednesday, the yen fell after an influential Bank of Japan official soothed investors’ fears that a further increase in the Japanese currency may rock global markets again by playing down the chances of a rate hike in the near term.
The yen dropped around 2.5% to 147.94 per dollar, a session low, after the comments by BOJ Deputy Governor Shinichi Uchida. The dollar was last 1.79% higher at 146.940 yen.
Uchida said as there was sharp volatility in overseas and domestic financial markets, the central bank had to maintain current levels of monetary easing for the moment.
His remarks were in contrast to Governor Kazuo Ueda’s hawkish comments last week when the BOJ hiked interest rates unexpectedly, pushing Japanese stocks up, and leaving them effectively unchanged for this week.
The hike by the BOJ last week, together with early July’s intervention by Tokyo, resulted in traders bailing out of once-popular carry trades in which investors borrow the yen at low rates and then invest it in assets that provide higher returns.
The unwinding of carry trades together with weak U.S. jobs data and worries about an AI bubble resulted in global stocks tumbling this week, started on Monday with a 12% crash in Japanese equities.
