NEW YORK (Reuters) - The U.S. dollar and euro were on track to post their biggest daily losses against the yen in more than five years on Thursday in the wake of the Bank of Japan’s surprise decision not to further ease monetary policy.
The dollar was last down more than 3 percent against the yen, at 108.06 yen, near a 10-day low of 107.93 yen touched earlier and ushering in the dollar’s biggest daily decline against the yen since mid-March 2011.
The euro was last down 2.8 percent against the yen, at 122.70 yen, after hitting a 10-day low of 122.56 yen. The euro was also set for its biggest daily drop against the Japanese currency since mid-March 2011.
The BOJ decided to hold monetary policy steady on Thursday in the face of soft global demand and a sharp rise in the yen, defying expectations for increased stimulus measures to fight deflation.
“You had a market that was very short yen, and they walked into today destroyed,” said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. He said traders were still looking to exit “short” bets against the yen, a scenario he said could lead the dollar to fall below 107 yen over the next week.
The dollar pared losses against the yen on stronger-than expected U.S. first-quarter consumer spending and core inflation, but later retraced losses.
“Unfortunately, the U.S. data was overshadowed by what happened in Japan,” Scalone said.
The dollar was also hit by the Federal Reserve’s decision on Wednesday not to give a strong sign of another rise in rates in June.
“The fact that the Fed was dovish and the BOJ did not deliver was certainly the hard combination that drove dollar/yen lower,” said Sebastien Galy, currency strategist at Deutsche Bank in New York.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last down 0.67 percent at 93.752 . The euro was last up 0.27 percent against the dollar at $1.1350, near a one-week high of $1.1368 touched earlier.
In addition to the BOJ, New Zealand’s central bank skipped a chance to cut its interest rates on Thursday, triggering a short squeeze that saw the kiwi dollar soar more than 2.3 percent to an eight-day high of $0.6990.
On Wall Street, the benchmark S&P 500 stock index was last down 0.97 percent.
Reporting by Sam Forgione in New York; Additional reporting by Patrick Graham in London; Editing by Tom Brown and Leslie Adler