Yen falls in defiance of historic BOJ shift; dollar firm

investing.com:

By Amanda Cooper

LONDON (Reuters) -The Japanese yen tumbled on Tuesday after the central bank made the momentous, but widely anticipated, decision to end its negative interest rate policy, while the dollar rose ahead of the upcoming Federal Reserve decision on rates.

In an historic shift from decades of massive monetary stimulus, the Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of unorthodox policy at the conclusion of a two-day policy meeting.

Still, the yen dropped by as much as 1% and weakened past 150 to the dollar after the news, as most investors had already priced in a change.

The yen last stood at 150.55 to the dollar. Against the euro, the Japanese currency similarly slid 0.7% to 163.22, around its weakest in three weeks.

«It's a classic 'buy the rumour, sell the fact.' I don't think the BOJ was going for the shock-and-awe approach this time,» said Bart Wakabayashi, Tokyo branch manager at State Street (NYSE:STT).

With Japan's first interest rate hike in 17 years, the central bank said it would guide the overnight call rate — its new policy rate — in a range of zero to 0.1%, adding that it expected «accommodative financial conditions» to be maintained for the time being.

That is likely to keep pressure on the yen, as interest rate differentials between Japan and the United States remain stark.

«The market has taken it as a green light to increase the short yen positioning that was already in place, given the forward guidance from the BOJ was fairly cautious, and not really enough to draw further hawkish repricing in the Japanese rate market,» MUFG currency strategist Lee Hardman said.

This week brings a raft of central bank decisions that are dominating action in the