Japanese Yen crosses are rallying ahead of this evening’s Bank of Japan interest rate decision. The central bank is widely expected to leave interest rates unchanged because deflation remains a constant battle.
Earlier this week we had talked about how the cell phone price war in Japan is driving prices lower. Today, convenience stores were split on whether to raise food prices on some products despite an increase in their own costs. Although the problems in the credit markets have subsided, the fact that the Federal Reserve has initiated the trend of lowering interest rates makes a rate hike by the Bank of Japan stick out like a sore thumb and Japanese growth has not been stellar enough to warrant a rate hike. Even though the Dow is weaker today, the Yen still sold off against every major currency pair with exception of the Australian, New Zealand and Canadian Dollars.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com