The dollar slid to a 21-month low against the yen on Thursday as the yen surged after the Bank of Japan held off from expanding its monetary stimulus.
The greenback had already been under pressure after the US Federal Reserve lowered its economic growth forecasts and scaled back its rate hike projections, cementing expectations that it will have to skip tightening next month, although it still signalled it was planning to raise rates twice this year.
The dollar came under renewed pressure against the yen after the BOJ kept its monetary policy unchanged.
“For today’s BOJ decision the view was that they wouldn’t do anything, but there was also a bit of caution that they might, and that had tempered (dollar/yen) moves until the announcement,” said Shinsuke Sato, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo.
The BOJ’s decision to hold off from additional monetary easing triggered a burst of yen buying, he added.
The dollar fell to as low as 104.505 yen, its lowest level since September 2014. It last traded at 104.83 yen, down 1.1 per cent on the day.
Brexit woes
Ongoing worries that Britain may vote next week to leave the European Union weighed on sterling and helped lend support to the yen, which is seen as a safe haven in times of market stress, partly because of Japan's net creditor status.
Sterling eased 0.1 per cent to $1.4185, having hit a two-month low of $1.4091 on Tuesday.
Against the yen, sterling fell 1.1 per cent to 148.50 yen on trading platform EBS, its lowest level since August 2013.