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New York - The Bank of Japan's surprise interest cut on Friday sent the yen tumbling against other major currencies.
But the dollar surprisingly gained when a worse-than-expected US report on economic growth in the fourth quarter weakened the argument for the Federal Reserve hiking interest rates again at its next meeting in March.
The yen lost nearly 2% on the greenback, to ¥121.12, and almost 1% on the euro, to ¥131.19, after the BoJ cut its short-term rate paid for bank deposits into negative territory.
"The adoption of negative interest rates, a practice currently used by central banks in the eurozone and Switzerland, are designed to get banks to step up lending to boost growth or pay penalties for leaving money on deposit at the central bank," said forex analyst Joe Manimbo at Western Union Business Solutions.
"Negative interest rates will tarnish the yen's allure to those seeking refuge from volatile global markets."
US fourth-quarter gross domestic product growth came in at a lower-than-expected 0.7%, after a 2.0% pace in the third quarter, signaling possibly another winter slump.
Stock and bond markets took that as support for the Fed keeping its still ultra-low interest rate unchanged in March, but, against expectations, the dollar gained on the euro and pound.
Kathy Lien of BK Asset Management pointed to poor eurozone data as the culprit: a fall in German consumer spending, slower French economic growth in the fourth quarter, and still-weak inflation in France.
