The dollar rose to around ¥111.40 in Tokyo trading Tuesday, backed by purchases to cover short positions after the Bank of Japan’s announcement of the outcome of its policy-setting meeting.
At 5 p.m., the dollar stood at ¥111.39-40, up from ¥111.02-02 at the same time Monday. The euro was at $1.1715-1716, up from $1.1668-1669, and at ¥130.51-52, up from ¥129.56-56.
The dollar fell below ¥111 in the morning as the Nikkei 225 fell over 100 points.
The dollar lost further ground after the BOJ said in the early afternoon that it will flexibly purchase Japanese government bonds while keeping the target of buying JGBs worth around ¥80 trillion annually.
But the greenback jumped to top ¥111.40 on short-covering buying triggered by the central bank’s other decision to keep its policy of guiding Japan’s key long-term interest rate to levels around zero, a currency broker said.
“Overseas hedge funds and other short-term players that had expected a monetary policy shift by the BOJ moved to buy back the dollar,” a Japanese banker said.
The U.S. currency met with selling after BOJ Gov. Haruhiko Kuroda told a news conference that the central bank would allow interest rate fluctuations about twice as wide as now.
But dollar buying gradually gathered steam on the back of the view that the interest rate gap between Japan and the United States will expand, another currency broker said.