By Gina Lee

Investing.com – The dollar was down on Tuesday morning in Asia. After its worst 16-month session, the yen struggled to find a footing as the Bank of Japan kept bond yields low while others are increasing sharply.

This chart tracks the greenback’s value against a basket currency by tracking it at 11:49 pm ET (3:49 GMT).

This pair fell 0.46% to 123.23. Japanese data from earlier today showed the ratio as 1.21 and 2.7% in February.

With Australian increasing 1.8% monthly, the pair dropped 0.10% from 0.7480 to 0.7480. They increased by 0.07 to 0.6899

Both the pairs fell by 0.03% to 6.3700 and rose by 0.08% each to 1.3094

Overnight, the Japanese currency plunged by 2.4% against its dollar. It was then at its lowest level since August 2015. However, it recovered to 124.24 during volatile Asian trading. The U.S. Dollar was stable against all other currencies. It held the euro at $1.0988, capping a recent surge in the Australian dollar.

BOJ has purchased just over $500 million of bonds Monday, and will continue to make unlimited purchases three additional days in defense of its 10-year yield goal of 0.25%. This demonstrates the central bank’s resolve to keep its monetary policy ultra-easy and underscores a stark contrast with the hawkish stance adopted by the U.S. Federal Reserve which has added to the yen’s losses.

In March 2022, the yen has fallen nearly 7 percent and is almost 10% below its Australian counterpart. Investors are beginning to doubt Japan’s long-term dovish policies by the visible decline in Japanese government bond yields.

“Anyone who watched the Reserve Bank of Australia (RBA) ‘cap’ blow is probably excitedly and logically short JGBs right now hoping for a similar move in Japan rates,” Spectra Markets president Donnelly told Reuters, referring to RBA’s abandonment of its yield target in November.

The minutes from the BOJ’s latest meeting stressed the need to keep monetary policy ultra-loose, even as some signs of growing inflationary pressure emerge. Economists are predicting that the key level of 125 is approximately at where dollar/yen peaked last year in 2015.

According to Kentaro Koyama, chief economist at Deutsche Bank AG, “Japan’s yen appreciation is a problem for Japan because it is facing rising inflation, particularly households,” Reuters was told.

“If the dollar/yen exchange rate exceeds 125, I would expect more serious verbal interventions.”

Shunichi Suzuki, the Japanese Finance Minister, also stated earlier that Japan would closely monitor foreign currency market movements to prevent “bad yen weakness”.