USD/JPY tests one-month highs above 157.00 after a dovish BoJ

• The USD rallied beyond 2% after the Fed and the BoJ's decisions to hit levels right above 157.00.
• The Bank of Japan left interest rates at 0.25% and conditioned further tightening to the evolution of wage negotiations.
• Monetary policy divergence between the US and the Japanese Central banks is weighing on the Yen.

The Yen is dropping across the board on Thursday, weighed by a dovish BoJ monetary policy decision. This, coupled with the hawkish stance reflected at Wednesday’s monetary policy statement, has pushed the pair to test levels above 157.00.

The Bank of Japan kept its benchmark interest rate unchanged at 0.25% with Governour Ueda failing to clarify whether they will hike rates in January, as some market sources had anticipated.

Ueda warned that prolonged easing conditions may lead to a surge in inflation but he conditioned the next policy decisions on the evolution of the wage negotiations. Investors reacted by selling the Yen against its main rivals.

The Yern was already on its back foot after the outcome of Wednesday’s US Federal Reserve meeting. The bank cut interest rates by 25 basis points but projected two cuts in 2025, instead of the four anticipated in September, which sent US Yields and the USD surging.