Dollar Surges as Bank of Japan Maintains Monetary Easing Amid Global Market Volatility

The dollar strengthened against the yen after the Bank of Japan deputy governor announced no interest rate hikes amid unstable financial markets. The yen fell sharply, highlighting market volatility influenced by recession fears and unwinding of carry trades. Fed's potential rate cuts and U.S. economic data remain key market movers.

The dollar strengthened on Wednesday, gaining up to 2% against the yen following comments by Bank of Japan Deputy Governor Shinichi Uchida. Uchida stated that the central bank would not raise interest rates due to the current instability in financial markets. This sent the yen down over 1.5%, trading at 146.70 per dollar, after hitting session lows of 147.50.

"Given the sharp volatility we are seeing in both domestic and overseas financial markets, it's necessary to maintain the current levels of monetary easing for the time being," Uchida remarked. The yen had previously hit a seven-month high of 141.675 per dollar on Monday, a stark recovery from its 38-year low of 161.96 in July.

The dollar's rise was further influenced by disappointing U.S. job data and earnings from major tech companies, which spurred a global sell-off in riskier assets due to recession fears. The U.S. dollar index rose 0.22% to 103.19, moving away from a seven-month low. Fed rate cuts are now highly anticipated, with major brokerages expecting a significant rate cut in the next meeting.

(With inputs from agencies.)