Yen slides as BOJ’s piecemeal policy tweak underwhelms. The Bank of Japan (BOJ) took a minor step toward ending years of substantial monetary stimulus. Still, some investors expected a more decisive move, so the yen dropped on Tuesday and lingered near a one-year low versus the dollar.

After concluding a two-day policy meeting, the BOJ revised its definition of 1.0% to a flexible “upper bound” rather than a strict ceiling. However, it would maintain the yield on a 10-year government bond at 0%, as determined under its yield curve control (YCC).

A promise to defend the level with contracts to purchase an infinite number of bonds was also eliminated. According to some observers, this decision ostensibly ended the BOJ’s infamous YCC regime, but the yen still declined by about 0.8% past the 150 per dollar mark, reaching an intraday low of 150.26.

Similarly, the euro increased by 0.7% to 159.30 yen, while the pound rose by 0.63% to 182.44 yen. “Since the 1% ceiling is no longer strictly enforced, JGB yields can increase over 1%. This is comparable, in some ways, to discreetly letting YCC go into the background, according to OCBC currency expert Christopher Wong.

The BOJ may let 10-year JGB rates increase by over 1%, according to a Nikkei story published on Monday. This move in the yen also reflected anticipation of a modification already being factored in.

“The market has already fully priced in the decision made today with the Nikkei article,” Oxford Economics senior Japan economist Norihiro Yamaguchi stated. “Some seem to have expected a total abolishment of YCC, which was not the case.”

BANK REIGNS

In other news, the dollar continued to rise broadly; the index was last up 0.16% at 106.33.

Even if it appeared that the index would close the month mostly unchanged, analysts point out that the likelihood of another rate rise from the Federal Reserve supports the dollar and highlights the resilience of the American economy.

Regarding the Fed’s next rate decision on Wednesday, “the Fed can still have the luxury of sounding hawkish in its outlook by stressing the ‘high for long’ narrative,” according to Thierry Wizman, global FX and interest rates strategist at Macquarie.

“As long as that’s still the case, and as long as the U.S. economy displays more robustness in its official data than the rest of the world does, the euro, sterling, yen, and Australian dollar will have a tough go at appreciating vs. the U.S. dollar.”

With a modest 0.3% gain for October, the euro appeared poised to snap two months of losses. It closed 0.08% down at $1.0606.

On Monday, data revealed that Germany’s inflation rate decreased significantly in October, while another study showed that the continent’s biggest economy contracted little in the third quarter.

Preliminary statistics released on Monday also indicated that October’s 12-month inflation in Spain remained at 3.5%, the same as in September.

The numbers were released ahead of Tuesday’s anticipated inflation statistics for the eurozone. Ahead of the Bank of England’s anticipated neutral interest rate decision later this week, the pound dropped 0.15% to $1.2149, putting it on track to lose close to 0.5% for the month.

In other news, the Australian dollar fell 0.29% to $0.6355, putting it on track to lose more than 1% monthly.

On Tuesday, more pressure was applied to the Antipodean currency, frequently used as a liquid stand-in for the yuan, when statistics revealed that October saw an unexpected decline in China’s industrial activity.

Due in part to a surprise low report on domestic inflation in the third quarter that reduced the likelihood of another rate hike, the New Zealand dollar fell 0.2% to settle at $0.58325 and was expected to decrease by over 3% in October.