Investing.com - The Japanese yen weakened sharply after the central bank unveiled policy changes on Wednesday that showed a sharp new effort to spur inflation.
USD/JPY changed hands at 102.53, up 0.82%, while AUD/USD traded at 0.7546, down 0.13%.
The Bank of Japan unveiled complex changes to its policy framework by setting a target for long-term interest rates that retains a ¥80 trillion asset purchase plan, but in a drastically rejigged fashion as part of aims to change inflation expectations.
Earlier, Japan reported a trade balance deficit of ¥19 billion for August, widely missing an expected surplus of ¥202 billion, with imports down 17.3%, just shy of the 17.8% drop seen, and exports slumping 9.6%, compared to a 4.8% decline year-on-year expected.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 0.25% to 96.21 after the BoJ announcement.
Overnight, the dollar held steady against the other major currencies in subdued trade on Tuesday, after the release of downbeat U.S. housing sector data as investors remained cautious ahead of the Federal Reserve later on Wednesday.
The U.S. Commerce Department said housing starts dropped 5.8% to 1.142 million units last month from July’s total of 1.212 million units. Analysts had expected a decline of 1.7% in August.
Meanwhile, the number of building permits issued declined 0.4% to 1.139 million units from 1.144 million. Economists had forecast a 2.5% rise to 1.170 million units in August.
Investors remained cautious with the U.S. dollar ahead of the Fed’s monthly policy meeting, set to begin later Tuesday, amid ongoing uncertainty over a possible rate hike. Investing.com's Fed Rate Monitor Tool shows a 15% market expectation for a rate hike.