The yen on Thursday racked up its biggest daily gains since the 2011 earthquake that spurred a nuclear crisis, surging 3 percent against the euro and dollar after the Bank of Japan opted out of further moves to ease monetary policy.
Adding to the mix was the lack of a strong sign from the U.S. Federal Reserve on the chances of another rise in its rates in June, weakening the dollar just over half a percent against a basket of currencies .DXY and 0.2 percent against the euro. EUR=
A 10 percent surge for the yen has been one of 2016's big currency events so far, prompted by a flood of money seeking out the traditional safety of Japan amid increasing jitters about the solidity of banks and global growth.
The BOJ's response is being closely w atched and the yen fell sharply last week on the back of a handful of media reports that it would effectively start paying banks to lend.
Governor Haruhiko Kuroda said he was not thinking about applying negative rates to lending institutions, in direct contradiction of those reports, while leaving the door open to more action in future.
"With today's policy announcement, the Bank of Japan has essentially excited to disappoint and as a result we've seen the yen moving dramatically stronger in immediate reaction," said Nick Gartside, Chief Investment Officer for Fixed Income at JP Morgan Asset Management.
By 1100 GMT, the dollar had fallen 3.0 percent to 108.11 yen and the euro 2.8 percent to 122.73 yen.
Officials have used language in recent weeks that in the past has prefaced intervention to weaken the yen but most major banks have come to the conclusion that Tokyo will not do so, at least until the currency gets closer to 100 per dollar.
"I doubt very much they are going to intervene at all," said Derek Halpenny, European Head of Global Markets Research at Bank of Tokyo-Mitsubishi in London.
"The G20 has set a framework where it really is only disorderly or unwarranted market moves that justify taking action. Even 3 percent, when it is a reaction to the BOJ, seems unlikely to provide justification."
Like a number of other Japanese bank analysts, he was not convinced the yen could continue to gain, given the scale of extra yen being pumped into the financial system.
"It was inevitable that the yen regained all the losses made on easing expectations," said Koji Fukaya, president of FPG Securities in Tokyo. "Sure, the market was disappointed, but that does not mean the yen will keep gaining."
After a two-day policy meeting that ended Wednesday, the Fed said global economic headwinds - widely seen as the main reason it has not pushed rates higher - remained on its radar while stopping short of mentioning the risks these posed.
New Zealand's central bank also skipped a chance to cut its interest rates on Thursday, triggering a short squeeze that saw the kiwi dollar soar 2.1 percent to $0.6952 NZD=D4.
(Additional reporting by Shinichi Saoshiro in Tokyo and Ian Chua in Sydney; Editing by Ma rk Heinrich)
