Forex Today: BoJ keeps policy rate unchanged, Gold rises toward $5,000

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-1.31%	-1.03%	0.91%	-0.85%	-2.56%	-2.76%	-1.26%
EUR	1.31%		0.28%	2.20%	0.46%	-1.27%	-1.48%	0.04%
GBP	1.03%	-0.28%		1.67%	0.18%	-1.55%	-1.75%	-0.23%
JPY	-0.91%	-2.20%	-1.67%		-1.69%	-3.38%	-3.58%	-2.09%
CAD	0.85%	-0.46%	-0.18%	1.69%		-1.70%	-1.91%	-0.41%
AUD	2.56%	1.27%	1.55%	3.38%	1.70%		-0.20%	1.33%
NZD	2.76%	1.48%	1.75%	3.58%	1.91%	0.20%		1.55%
CHF	1.26%	-0.04%	0.23%	2.09%	0.41%	-1.33%	-1.55%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The BoJ left its policy settings unchanged following the first policy meeting of the year, as widely expected. While speaking in the post-meeting press conference, BoJ Governor Kazuo Ueda said that he will not comment on foreign exchange levels but noted that a weak Japanese Yen could inflation imports costs and be passed on to domestic prices. Ueda further added that it will take quite a while until they see the impact of rate hikes on real economy and prices. USD/JPY edges higher following the BoJ event and trades in positive territory above 159.00.

Following the volatile action seen midweek, Gold gathered bullish momentum and rose more than 2% on Thursday. XAU/USD extended its rally during the Asian trading hours on Friday and touched a new record-high near $4,970 before retreating to the $4,950 area by the European session.

EUR/USD gained more than 0.5% on Thursday and erased all of Wednesday's losses. The pair corrects lower in the early European session on Friday and trades below 1.1750.

The UK's Office for National Statistics (ONS) reported on Friday that Retail Sales rose by 0.4% on a monthly basis in December. This print followed the 0.1% decline recorded in December and came in better than the market expectation of -0.1%. GBP/USD struggles to gain traction despite the upbeat data and trades slightly below 1.3500.

The US Dollar (USD) Index turned south in the American session on Thursday and closed the day deep in the red. The USD Index rebounds on Friday and fluctuates at around 98.50. In the meantime, US stock index futures were last seen rising between 0.1% and 0.3%, reflecting a risk-positive market atmosphere.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.