- CHF/JPY suffered heavy losses during European trading hours on Thursday.
- The SNB increased its base interest rate by 75 bps after the September meeting.
- The Japanese government has announced that it has intervened in the foreign exchange market.
After touching its highest level since 1980 above 151.00 during the day, the CHF/JPY pair lost more than 600 pips in the last hour. At the time of writing, the pair was down almost 3% on the day at 145.00.
Earlier in the day, the Bank of Japan (BoJ) announced that it had left its policy setting unchanged, keeping the key interest rate at 0.1% and leaving the 10-year JGB yield target at 0.00%. With the initial reaction of the JPY against its rivals, it weakened and allowed CHF/JPY to gain bullish momentum.
During European trading hours, the Swiss National Bank (SNB) said it had raised its key interest rate by 75 basis points to 0.5%. As markets speculated that the SNB might decide to hike by 100 bps, this decision caused the CHF to lose interest and limited CHF/JPY gains.
SNB raises rates by 75 bps to 0.50%, as widely expected.
Finally, Japan’s top currency diplomat Masato Kanda said they had intervened in the foreign exchange market to limit the weakening of the JPY, adding that the government “has taken decisive steps in forex market.”
Breakout: USD/JPY corrects sharply below 144.00 as Japan intervenes.
Combined with a smaller-than-speculated SNB hike of 75 basis points, the Japanese government’s intervention opened the floodgates and caused CHF/JPY to suffer one of its biggest one-day declines in its history.
15 minute chart of CHF/JPY