Yen Drops as BOJ Holds Rates and Fed Tone Lifts Dollar
October 30, 2025 – The Japanese yen weakened sharply against the U.S. dollar on Thursday after the Bank of Japan (BOJ) left interest rates unchanged and struck a less hawkish tone than markets expected. Meanwhile, the U.S. dollar rose, supported by remarks from Federal Reserve Chair Jerome Powell, who said a December rate cut is not guaranteed.
The yen fell 0.98% to 154.21 per dollar, its lowest level since February 13, while the U.S. dollar index climbed 0.35% to 99.49, reaching as high as 99.72 — its strongest since August 1.
Bank of Japan Stays Cautious, Despite Talk of December Hike
The BOJ kept interest rates steady, with Governor Kazuo Ueda signaling that a potential rate hike could come as soon as December, contingent on wage growth expectations. However, investors were disappointed by the lack of new policy guidance or urgency.
“Policymakers at Japan’s central bank disappointed yen bulls by staying on hold and exhibiting the same degree of dissent as in September,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
Analysts said Ueda’s cautious tone put renewed pressure on the yen.
“Ueda took people by the back foot a little bit — that he was so willing to wait it out,” noted Lou Brien, strategist at DRW Trading in Chicago.
Fed Comments Add Momentum to Dollar Strength
The Federal Reserve’s latest meeting added to the dollar’s momentum. Powell said that internal divisions within the central bank and limited access to federal economic data make it uncertain whether another rate cut will occur in December.
Although the Fed reduced rates as expected, two members dissented — Governor Stephen Miran, who favored a deeper cut, and Kansas City Fed President Jeffrey Schmid, who preferred no cut at all.
“Powell communicated clumsily,” said Brien. “It was maybe indicative that he lost a little control of the committee, or that the group was so divided he didn’t want to force a decision.”
Despite Powell’s caution, futures markets still price in a 71% probability of a December cut, down from 85% before his comments.
ECB Holds Steady, Euro Edges Lower
The European Central Bank (ECB) also kept rates unchanged at 2% for the third consecutive meeting, offering no hints about future policy moves. The euro slipped 0.2% to $1.1576, briefly touching $1.1546 — its weakest since October 14.
“The ECB’s steady-as-she-goes policy approach looks as if it will remain intact for many months yet,” said Schamotta. “Inflation pressures are muted, and Germany’s fiscal stimulus could help offset trade-related drags in early 2026.”
Other Currency Moves: Sterling and Crypto Declines
The British pound (sterling) fell 0.23% to $1.3162, its lowest since April 14, as traders priced in growing odds of a Bank of England rate cut. However, most analysts still expect the BOE to hold rates steady next week.
In cryptocurrencies, bitcoin dropped 3.13% to $107,989, extending a week-long decline amid global risk-off sentiment.
U.S.–China Trade Developments Add Complexity
Traders are also digesting news that President Donald Trump and Chinese President Xi Jinping reached a deal to reduce U.S. tariffs on Chinese imports in exchange for Beijing cracking down on fentanyl trafficking, resuming soybean purchases, and maintaining rare earth exports.
The trade truce added another layer of volatility to the global foreign exchange landscape, influencing commodity-linked currencies and Asian markets.
Outlook: Yen Faces Continued Pressure Ahead of December BOJ Meeting
Analysts expect the yen to remain under pressure unless the Bank of Japan adopts a clearer tightening stance in December. Meanwhile, the dollar’s strength could persist if the Fed maintains a cautious tone on rate cuts.
With the ECB and BOE signaling stability and global central banks diverging in policy outlooks, traders anticipate continued volatility in major currency pairs heading into year-end.
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