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Yen falls as BOJ stands pat; China market rescue talk helps yuan, Aussie © Reuters. FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Rae Wee

SINGAPORE (Reuters) -The yen fell broadly on Tuesday after the Bank of Japan (BOJ) maintained its ultra-loose monetary policy in a closely watched policy decision, matching market expectations.

The Japanese currency was last more than 0.2% lower at 148.39 per dollar, in the wake of the decision which saw the BOJ hold its short-term interest rate target steady at -0.1% and 10-year Japanese government bond (JGB) yield target around 0%.

At the conclusion of its two-day policy meeting on Tuesday, the central bank also made no changes to its forward guidance on monetary policy and lowered its forecast for growth in core consumer prices for the coming fiscal year starting in April.

Against the euro, the yen slid 0.2% to 161.49. Sterling rose 0.43% to 188.56 yen.

“With the confirmation of the continuation of monetary easing, (dollar/yen) may test 150,” said Hirofumi Suzuki, chief FX strategist at SMBC in Tokyo, citing the stark interest rate differentials between Japan and the United States.

Expectations that the BOJ could phase out its negative interest rate policy this month had been quashed in the wake of the country’s devastating New Year’s Day earthquake and dovish comments by BOJ Governor Kazuo Ueda.

“Most analysts now predict the BOJ will exit its negative interest rate policy at the April meeting after the Shunto wage negotiation result becomes available,” said Joy Yang, head of Asian economic research at Point72.

“While we still see April as the most likely window, the risk that the BOJ will do the first hike later than April has been rising.”

The European Central Bank (ECB) also meets this week, where expectations are similarly for its deposit rate to be held steady at the current 4.00%.

ECB policymakers, including President Christine Lagarde, have pushed back against market expectations for early rate cuts.

That’s helped the euro a little, with the single currency having traded largely sideways over the past few sessions. It was last 0.05% higher at $1.0889.

CHINA AID

A report that China is weighing a rescue package for its plunging stock markets helped the yuan and the Australian dollar, which is often viewed as a more liquid proxy for exposure to China.

Chinese authorities are considering a package of measures to stabilise the stock market, Bloomberg News reported on Tuesday, citing people familiar with the matter.

The was last 0.2% higher at 7.1820 per dollar. Its onshore counterpart rose more than 0.1% to 7.1803 per dollar.

Down Under, the rose more than 0.4% and was last 0.29% higher at $0.6589.

The New Zealand dollar gained 0.17% to $0.6088, after having fallen to a two-month low of $0.60625 earlier in the session.

“The news has triggered risk proxies, including the Australian dollar, New Zealand dollar … higher,” said Christopher Wong, currency strategist at OCBC.

“It remains to be seen if this is just talk but if it does materialise sooner than later, then risk proxies can trade higher.”

In the broader market, the dollar eased slightly, sending sterling up 0.07% to $1.2720.

The dipped 0.1% to 103.30, though remained not too far from an over one-month high of 103.69 hit last week, as traders pare back their expectations for a rate cut by the Federal Reserve in March.

That’s kept U.S. Treasury yields supported, with the two-year yield last at 4.3910%. The benchmark 10-year yield likewise settled above 4% and was last at 4.1014% [US/].

“We look for the FOMC to remain in a holding pattern, not only with the Fed funds rate at its January meeting, but also with its policy guidance,” said economists at Wells Fargo ahead of next week’s Fed meeting.

“While progress in lowering inflation over the past six months has built the case that rate cuts are coming, the economy’s recent performance suggests no imminent need to ease.”

In cryptocurrencies, bitcoin rose 0.4% to $39,974, after slipping below the $40,000 level in the previous session for the first time since the launch of 11 spot bitcoin exchange-traded funds on Jan. 11.

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