Dollar Plunges to Upper 138 Yen Zone Amidst Speculation Over BOJ Policy Adjustment

The U.S. dollar saw a dramatic fall to the upper 138 yen level in Tokyo’s early trading hours on Friday. This substantial shift was driven by widespread speculation that the Bank of Japan (BOJ) may be considering adjustments to its ultra-easy monetary policy during its meeting later that day.

The yield on the benchmark 10-year Japanese government bond soared to 0.505 percent, exceeding the central bank’s upper limit of 0.500 percent. This increase in yields was spurred by a news report suggesting that the BOJ could potentially discuss a policy alteration, which might permit long-term interest rates to rise above the current cap by a certain margin.

In reaction to this news report, the value of the dollar plunged by roughly 2 yen. As of 9 a.m., the U.S. currency was being traded at 138.88-91 yen, a noticeable drop from its preceding rates of 139.45-55 yen in New York and 139.98-140.00 yen in Tokyo at 5 p.m. the previous day.

Simultaneously, the euro was quoted at $1.0978-0979 and 152.43-52 yen, indicating a marginal fluctuation from its New York rates at $1.0971-0981 and 153.08-18 yen. Late Thursday afternoon in Tokyo, the euro was valued higher at $1.1128-1130 and 155.77-81 yen.

The Tokyo stock market reacted to the uncertainty surrounding the potential changes in BOJ’s policy by opening lower. Within the initial 15 minutes of trading, the 225-issue Nikkei Stock Average sharply fell by 428.81 points or 1.30 percent, settling at 32,462.35. In tandem, the broader Topix index also experienced a decline, dropping by 22.49 points, or 0.98 percent, to hit 2,272.65.

The downturn in the stock market had repercussions across various sectors, with electric power and gas, real estate, and service shares being among the most significantly affected. The market scenario remained volatile as investors keenly awaited the results of the BOJ meeting. They were also closely tracking any further developments in monetary policy that could potentially have a significant impact on the financial markets.

In conclusion, the speculation around the BOJ’s possible policy adjustment has already caused substantial ripples in the global financial markets. The U.S. dollar’s plunge and the corresponding rise in the yen’s value are indicative of the potential magnitude of these policy changes. Market participants worldwide will undoubtedly be watching the BOJ’s decisions closely in the coming days.