The yen continued to extend gains to trade at a 4-month high against the US dollar in the European session.
The yen's surge started from the Bank of Japan's (BOJ) surprise announcement to adjust the yield curve control program by allowing 10-year government bond yields to fluctuate between -0.5% and 0.5%, compared to -0.25 and 0.25% previously.
Although this move is not a major change in the BOJ's policy stance, the impact on the yen is significant with investors placing expectations for a shift to hawkish policy soon.
In a press conference following the announcement, Governor Haruhiko Kuroda emphasized that the change was not an increase in interest rates but to improve the functioning of the bond market.
The impact of the BOJ's decision also affected the stock market broadly, seeing the Nikkei index drop over 2.5% immediately after the announcement was made.
The dollar index also slipped lower, losing 0.6% to 104.00 against a basket of major currencies.
Meanwhile, the yen also gained strength against other major currencies, rising more than 3% against the euro to a 3-month high and a 2-month high against the pound.
The Aussie dollar slipped 3.5% against the yen to a 7-month low, while the New Zealand dollar hit a two-month low following a 3.8% decline against the yen.
