The New Zealand dollar hit a three-week high against the yen after the Bank of Japan introduced a negative interest rate policy, weakening its currency.
The kiwi touched 79.08 yen, and was trading at 78.51 yen at 8am in Wellington, from 77.96 yen at 5pm on Friday. The local currency was at 64.77 US cents this morning, from 64.69 cents at the New York close and 64.80 cents on Friday.
The yen slumped after the BoJ on Friday adopted a negative interest rate of minus 0.1 per cent on some deposits held with it, effectively charging financial institutions for holding their money. In making the move, the BoJ joined the European Central Bank, the Swiss National Bank, the Danish central bank and Sweden's Riksbank, and stoked speculation that the US Federal Reserve will be hesitant to increase its interest rates further.
"With the negative interest rate only applied to a small amount of bank reserves, the policy was really designed to weaken the yen, fuelling the global 'currency war', and that was the result," Bank of New Zealand currency strategist Jason Wong said in a note.
"The move to negative rates in Japan, with a promise to go further into negative territory if required, is likely to keep the yen under pressure over coming months.
