NEW YORK ( TheStreet) -- The dollar has been under pressure this month against both the yen and the euro, as monetary policy meetings have failed to produce suggestions of additional stimulus in Japan or Europe.
The latest example of this was seen with this week's Bank of Japan interest rate decision, where voting members chose not to extend maturities on bank loans or to make alterations to the bank's annual plans to inject 60 trillion yen ($610 billion) into Japan's monetary base.
The yen rallied after the meeting, as a cross section of the market was expecting the central bank to enact measures to reduce volatility in Japanese bonds.
Moves like this in the yen are likely to occur any time markets perceive the Bank of Japan as being unable to reign in bond yields or ineffective in implementing a sustainable strategy to drive economic growth.The yield on the 10-year Japanese government bond had risen from its all-time low of 0.315% to 1% after the Bank of Japan announced its historic stimulus program (which doubled monthly bond purchases).
But at the June meeting, a more conservative bias was voiced, and the lack of additional policy easing has led to extreme selling pressure in the Nikkei 225 and rallies in the yen (to more than 94 vs. the dollar). This month's moves have been massive, and valuations are now approaching levels seen when the Bank of Japan's stimulus programs were originally announced.