TOKYO, Dec 20 (Reuters) – The yen surged to a four-month peak against the dollar on Tuesday after the Bank of Japan stunned markets by deciding to review its yield curve control policy and widen the trading band for the 10-year government bond yield.
While it kept broad policy settings unchanged – pinning short-term JGB yields at -0.1% and the 10-year yield around zero – the BOJ decided to let long-term yields to move 50 basis points either side of its 0% target, wider than the 25 basis point band previously.
At the post-announcement media briefing, BOJ Governor Haruhiko Kuroda sought to emphasize that the change was “not an interest rate hike,” but to improve bond market function. He reiterated that it’s too early to discuss an exit from stimulus.
The dollar last traded 2.93% weaker at 132.91, after earlier tumbling as much as 3.1% to 132.68 yen , a level last seen in mid-August.
Most BOJ watchers had expected no changes until Kuroda’s…
