London Daily

Focus on the big picture.
Wednesday, Sep 02, 2026

Yen tanks as FX market adjusts to central bank rate decisions

Yen tanks as FX market adjusts to central bank rate decisions

The Japanese yen tumbled against the dollar on Friday after the Bank of Japan bucked a wave of tightening and stuck with its ultra-accommodative stance, adding to soaring volatility in currency markets hit by a series of rate hikes this week.

Currency markets have been roiled by one of the biggest runs of monetary policy tightening in decades, including the Federal Reserve's mid-week three-quarters-of-a-percentage-point rate increase, its biggest since 1995, and the Swiss National Bank's surprise decision to hike rates by 50 basis points.

Japan's central bank swam against the current on Friday, keeping its policy settings unchanged and vowing to defend its bond yield cap of 0.25% with unlimited buying.

"Everybody expected the BOJ to do something. They didn't," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

The yen, which on Wednesday hit a 24-year low of 135.6 per dollar, plunged in reaction to the BOJ decision. The Japanese currency was last down 2.09% against the greenback at 134.885 yen, and was 1.62% lower versus the euro .

The 135 level has been a technical resistance point for the yen and breaking through it could force many shorts against the dollar-yen currency pair to have to cover their bets, potentially pushing the pair up to 137 or 140, said Schlossberg.

"If we start to really creep higher from this point, I think it will definitely force some of these early shorts out of the trade," he said.

yen 24 year lows


The dollar rose from a one-week low against major peers, bouncing off a two-day slide after the Fed's mid-week rate increase of 75 basis points, a move that was anticipated by markets as the Fed attempts to tame stubbornly high inflation.

The dollar index, which measures the currency against a basket of six rivals, was up 0.732% at 104.64 , putting it on track for a weekly rise of around 0.4% ahead of a long weekend in the United States.

"Today we're seeing a rebalancing of the market," said Simon Harvey, head of FX analysis at Monex Europe. "Markets are still adjusting to the central bank meetings from throughout the week."

The euro was last down 0.53% at $1.0496 versus the dollar.

The Swiss National Bank's surprise decision to raise rates by half a percentage point continued to reverberate through markets, with the franc touching 1.0098 against the euro, its strongest since April 13, as investors bet the SNB would not try to stop the strengthening currency as it has in the past.

Giving up earlier gains against the Swiss currency, the dollar lost 0.31% to 0.9696 francs , after tumbling the most in seven years versus the Swissy in the previous session.

"The surprise rate hike in Switzerland, as well as the European Central Bank's announcement that it is working on a tool to prevent the fragmentation of the European bond markets, will help to limit USD strength around current levels," strategists at UBS's Global Wealth Management’s Chief Investment Office said in a research note.

Sterling dropped 0.99% to $1.2229, giving back most of its gains from when the Bank of England decided to lift rates again, albeit by less than many in the market had expected, along with a hawkish signal about future policy action.

Currency markets are also having to contend with a massive drop in risk sentiment that has roiled equity markets.

The Australian dollar, which is very sensitive to the broad global investment mood, fell 1.53% to just under $0.6938 after stock markets in Asia tumbled, while Wall Street edged higher after a steep selloff on Thursday.

Newsletter

Related Articles

0:00
0:00
Close
Cleveland Police Receive £2 Million to Tackle Serious Crime in Middlesbrough
Number of Young People in England Without a Close Friend Reaches Record Level
Five Arrested After Newborn Baby Dies From Stab Wounds in Sheffield
Nigel Farage Faces Questions Over Reported Second Parliamentary Standards Investigation
UK Retirement Funding Requirement Rises by £64,000 Compared With 2021
UK House Prices Rise for First Time Since April, Nationwide Says
FCA Chief Faces Allegations of Intimidating Consumer Group Over £9 Billion Car Loan Inquiry
Scottish Government Presses Ahead With Cap on Essential Food Prices
Burnham Government Moves to Overhaul Early Prison Release Scheme
UK Records Hottest Summer on Record in 2026, Met Office Says
UK Government Announces Major Reset of Diplomatic Policy Towards Israel
UK Pushes Back After Trump Reopens Falkland Islands Sovereignty Dispute
Keir Starmer Resigns as MP, Triggering Holborn and St Pancras By-Election
Andy Burnham Blames Brexit for UK’s Decade of Weak Growth in First Commons Address
England Faces Renewed Scrutiny Over Sewage Discharges and Water Quality
Victoria Beckham Business Reports First Operating Profit Since Launch
BT Expects £2 Billion From Copper Sales During Full-Fibre Rollout
UK Train Drivers Secure 3.6% Pay Rise and Avert Strike Action
FCA Chief Faces Scrutiny Over Alleged Pressure on Consumer Group in Car Finance Case
Kemi Badenoch Names Andrew Griffith Shadow Chancellor in Conservative Reshuffle
UK House Prices Rise for First Time Since April
UK Shop-Price Inflation Accelerates to 1.5% in August
Met Office Data Point to Hottest UK Summer on Record
UK Announces Emergency Prison Release Measures and £110 Million Capacity Expansion
UK Launches Expanded Free School Meals and 1,400 Breakfast Clubs
Bank of England Governor Warns G20 of AI-Related Economic and Cyber Risks
Prime Minister Andy Burnham Calls for Greater Public Control of Water, Energy and Transport
UK Gains Full Access to £13 Trillion Trans-Pacific Trade Bloc
UK Long-Term Borrowing Costs Hit 28-Year High as Oil Shock Drives Global Bond Selloff
Royal Mail Keeps First-Class Stamps at £1.80 and Second-Class at 91p
Church of England Prepares Formal Apology Over Historical Forced Adoptions
UK Competition Regulator Caps Veterinary Prescription Fees at £21
UK Aviation Authorities Roll Out Airspace Changes to Reduce Flight Delays
England Makes School Allergy Policies Mandatory Under Benedict’s Law
England and Wales Tighten Child Safeguarding Checks by Removing Supervision Exemption
Cornwall Geothermal Plant Begins Commercial Power and Lithium Operations
UK Inflation Holds Near 2.9% as Energy Costs Remain a Risk
UK Productivity Growth Averages 1.1% Over Two Years, Resolution Foundation Says
England Introduces Nationwide School Smartphone Ban and Uniform Limits
UK Gives Border Officers New Powers to Seize Migrants’ Mobile Phones
Green Party Wins First Westminster By-Election in Gorton and Denton
UK and EU Advance Gibraltar Border Deal Allowing Spanish Guards to Conduct Arrival Checks
Robert Jenrick Joins Reform UK After Losing Conservative Whip
Andy Burnham Faces First Prime Minister’s Questions After Labour Cabinet Overhaul
ScottishPower Recycles Nearly All Materials From Historic Hagshaw Hill Wind Farm
Millions Travel Across England, Wales and Northern Ireland for Summer Bank Holiday
Met Office Issues Yellow Thunderstorm Warnings Across Southern England
Four Arrested After Bank Holiday Stabbing Violence in Kettering
Scottish Chamber of Commerce Warns Tax and Business Costs Risk Holding Back Scotland
UK Government Launches Youth Employment Drive With Major Retailers
×