(Bloomberg) -- The yen slumped to its lowest level in 2024 after Bank of Japan officials ended the world’s last negative interest-rate regime, with currency traders focusing on the gap that remains between Japanese and US interest rates.

The Japanese currency on Tuesday fell as much as 1.2% to touch 150.95 per dollar, the weakest mark since Nov. 16. While BOJ Governor Kazuo Ueda noted in his press conference that risks of prices rising too much could result in a further rate hike, he said it’s important to keep conditions accommodative to support the economy.

The yen’s weakness is an indication that — at least in foreign-exchange markets — traders are still concentrating on the relative pickup in yields that’s available in other geographies compared to Japan.

“We did not receive any clear signals on future rate hikes from the governor,” said Yusuke Miyairi, a London-based foreign-exchange strategist at Nomura International Plc. “So in this regard, it could be viewed as a ‘dovish hike.’”

Miyairi expects the yen to weaken further in the near future as traders’ attention shifts to the Federal Reserve’s policy announcement on Wednesday.

Japanese government bonds, meanwhile, advanced amid the BOJ’s slightly dovish tone, sending the 10-year yield down roughly 3 basis points. The benchmark Topix equity gauge closed 1.1% higher while the Nikkei 225 Stock Average climbed 0.7% to break above 40,000 for the first time in about two weeks.

In the US, stocks gained and the 10-year Treasury yield edged lower, while the greenback advanced against most of its Group-of-10 peers.

Ahead of the BOJ’s decision, around 90% of central bank watchers saw a chance of the BoJ ending its negative rate settings at the meeting. The likelihood grew after the country’s largest union group announced first-round results to annual wage negotiations that exceeded expectations.

The yen weakened slightly in the week leading up to the BOJ decision, while the dollar appreciated amid expectations that Fed officials will take a cautious approach to cutting rates.

Forecasts for the yen to outperform its peers this year all but evaporated recently, with a slew of strategists earlier this month projecting the currency will end 2024 within a few percent of where it started.

Benchmark 10-year Japanese government bond yields, in contrast, had been edging higher. And the nation’s stocks have rallied this year, with the Nikkei 225 reclaiming the high it set back in 1989. 

High rates and a strong currency in the US have kept the yen under pressure. The dynamic appears set to continue, despite the BOJ’s hike, given ongoing strength in the US economy and resilient consumer spending there. Plus, Japan’s central bank will continue to buy bonds and pledges to respond to any rapid rise in yields.

“Dovish statements from the BOJ, coupled with the bank’s continued purchase of JGBs, could mean that the JPY remains weak against the USD, or until it becomes clear when the Fed is expected to start cutting rates,” wrote David Chao, a strategist at Invesco Asset Management in Singapore, in a note to clients. 

--With assistance from Winnie Hsu and Carter Johnson.

(Updates market levels throughout.)

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