Yen Slides As Bank Of Japan Retains Rate As Expected

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Thursday, after the Bank of Japan left its interest rate unchanged for the second consecutive meeting and downgraded its growth projections citing trade tariff threats.

The policy board decided, by a unanimous vote, to hold the uncollateralized overnight call rate at around 0.50 percent. This was the highest level since the global financial crisis in 2008.

Previously, the bank had raised the benchmark rate to the current level from 0.25 percent in January.

In its quarterly Outlook for Economic Activity and Prices report, the bank downgraded its fiscal 2025 growth outlook to 0.5 percent from 1.1 percent and the projection for the fiscal 2026 to 0.7 percent from 1.0 percent.

The economy is forecast to expand 1.0 percent in the fiscal 2027.

Inflation outlook for fiscal 2025 and 2026 were also lowered mainly due to the fall in crude oil prices and the downward revision of the GDP growth rates.

Inflation was projected to ease to 2.2 percent in the fiscal 2025 compared to the previous forecast of 2.4 percent. The estimate for the fiscal 2026 was trimmed to 1.7 percent from 2.0 percent. For the fiscal 2027, inflation was seen at 1.9 percent.

Final Purchasing Managers' survey results released earlier in the day showed that the manufacturing sector contracted less than initially estimated in April. The au Jibun Bank factory PMI rose to 48.7 from 48.4 in the previous month. The flash reading was 48.5.

The focus now shifts to the press conference held after the meeting, where remarks made by BoJ Governor Kazuo Ueda will be attentively examined for clues about the future course of rate hikes, which might have a big impact on the movement of the JPY in the near future.

The JPY's decline was further fueled by earlier comments made by U.S. President Donald Trump that raised hopes of a possible reduction in trade tensions between the US and China. The demand for conventional safe-haven assets like the Yen was subsequently impacted by this.

In the Asian trading, the yen fell to a 4-day low of 143.85 against the U.S. dollar and a 9-day low of 173.99 against the Swiss franc, from yesterday's closing quotes of 143.02 and 173.17, respectively. If the yen extends its downtrend, it is likely to find support around 148.00 against the greenback and 175.00 against the franc.

Against the euro and the pound, the yen edged down to 162.70 and 191.28 from Wednesday's closing quotes of 161.95 and 190.52, respectively. The yen may test support near 165.00 against the euro and 195.00 against the pound.

Looking ahead, the Bank of England's U.K. mortgage approvals data March and U.K. S&P Global final factory PMI data for April are slated for release in the European session.

In the New York session, U.S. weekly jobless claims data, U.S. and Canada PMI data for April and U.S. construction spending data for March are slated for release.