BoJ ends chaotic year in currency markets with a bang

The BoJ’s surprise decision to widen the tolerance band around its yield curve control target earlier this week will hopefully prove the final curveball of what has been an eventful year across currency markets. The yen has surged around 3% against the US dollar in the wake of the BoJ’s unexpected announcement, and more against some other G10 currencies, which have generally fallen against the greenback as risk sentiment has worsened in recent days amid renewed concerns that central banks are on path towards overtightening policy. We expect more of the same next year: we anticipate that the dollar will rebound further over the first half of next year as the global economy continues to falter and risk sentiment deteriorates across markets.