Yen eyes one of its biggest gains of past decade

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Four sessions: How long it took the yen to climb by 3 per cent after the Bank of Japan announced negative interest rates on January 29.

Four hours: How long it took the yen to climb by 3 per cent today after the BoJ decided against further monetary easing.

The Japanese currency’s surge today following investors’ disappointment with the BoJ’s “on hold” stance is shaping up as one for the history books, writes Peter Wells.

At the intra-day high in European trading of Y107.92 per dollar, the yen was sitting 3.18 per cent firmer, making it the third-biggest one-day rise for the currency over the past decade. Considering that periods spans the gut-wrenching volatility of the financial crisis, today is a big move.

Only moments ago, the yen just edged past the previous most recent large gain, of 3.07 per cent on August 24 last year, which coincided with heightened volatility caused by China’s stock market sell-off and renminbi devaluation. A number of financial markets and currencies saw huge moves on that day.

The yen hit a 17-month high of Y107.63 on April 11, which meant all the weakness since the BoJ boosted its quantitative easing programme in October 2014 had been wiped out.

The Nikkei 225′s 3.6 per cent fall on Thursday was its biggest one-day drop since February 12, while the broader Topix’s 3.2 per cent tumble was its biggest since April 1.

Last week, the yen weakened by 2.8 per cent, propelled on the Friday by reports the BoJ was considering offering banks cheap loans to help ease the burden of the negative interest rate policy. It was the biggest weekly drop since the week ended October 31, 2014.

Today, that all went up in a puff of smoke.

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