The Japanese unit also fell against the dollar, dropping to a six-month low, Reuters reported.
As widely expected, the Bank of Japan maintained its short-term target of 0.1% and the 0% cap on the 10-year bond yield set under the Yield Curve Control (YCC) policy.
Bank of Japan Governor Kazuo Ueda said he expects inflation to ease, but that “the pace of decline is rather slow.”
The yen fell broadly after the decision and hit a 15-year low of 155.22 against the euro. It is poised for its biggest weekly decline against the euro in three years. The euro was last up 1.1% at 155.16 yen.
The dollar rose 1.1% against the Japanese currency, to 141.795, after earlier touching its highest level since November. It was on track for its biggest daily percentage gain since late April.
“The Bank of Japan added fuel to this dollar fire today by holding it back,” said Eric Pregar, director of currency and precious metals risk management at Silver Gold Bull in Toronto.
Elsewhere, the euro braced for its best week against the dollar since June after the European Central Bank raised borrowing costs to a 22-year high and hinted at further tightening.
That and some weak US data saw the dollar drop as traders cut their bets on how much higher US interest rates are needed.
The euro settled against the dollar at $1.0940 after earlier touching a five-week high, having risen more than 1% on Thursday following an interest rate hike and European Central Bank guidance.
European Central Bank President Christine Lagarde told a news conference that another rate hike in July is very likely and the central bank still has a “covering floor” to fend off rising inflation.
The pound rose 0.4% to $1.2831 after earlier rising to its highest level since April 2022, as traders ramped up bets that the Bank of England will raise interest rates for the 13th consecutive meeting next week.
The ECB’s policy decision came a day after the Fed left interest rates unchanged, snapping a streak of 10 consecutive hikes. However, the Fed also indicated that rates may still need to rise by as much as 50 basis points by the end of this year.
However, recent data showed that US economic activity is slowing and inflation is slowing, challenging the Fed’s still hawkish stance.
On Friday, data showed waning inflation expectations that lifted US consumer sentiment to a four-month high in June. The survey’s reading of one-year inflation expectations fell to 3.3% this month from 4.2% in May.
In afternoon trading, the dollar index rose 0.1% to 102.24, after falling to a five-week low on Thursday. It was on track for its weakest weekly performance since January.
“After July, we don’t think there will be another increase, but the first decrease will be in December,” said Vasily Serebryakov, a forex strategist at UBS in New York.
“We think the economy will slow significantly in the second half, with inflation falling below what the Fed expects.”
Also on Friday, the US Treasury Department said it found no major US trading partners had manipulated their currencies for export advantage, adding that it had ended “enhanced analysis” of Switzerland after the country met only one of three manipulation criteria.
The forex market showed little reaction to the news.
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