U.S. dollar, Euro, Yen and Pound banknotes are seen in this illustration taken May 4, 2025. REUTERS/Dado Ruvic/Illustration
Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking

By Rae Wee

SINGAPORE (Reuters) -The yen fell on Thursday after the Bank of Japan (BOJ) left rates unchanged, while the dollar held gains as traders trimmed bets of another U.S. rate cut this year and awaited more details on a potential trade deal between Washington and Beijing.

The BOJ maintained its policy rate at 0.5% as expected at the conclusion of its two-day monetary policy meeting, but repeated its pledge to continue increasing borrowing costs if the economy moves in line with its projections.

Still, investors saw the decision as a cautious one from the BOJ, with only two policymakers again calling for a hike - the same as in September - underscoring the central bank's gradual pace in normalising policy.

That heaped pressure on the yen, which fell 0.15% against the dollar to 152.97, languishing near an eight-month low.

The euro rose 0.3% to 177.72 yen, while sterling similarly gained 0.26% to 201.93 yen.

"The lack of a rate hike was not a big surprise, because the market wasn't expecting a hike anyway, but I think the market was kind of disappointed that the number of dissenters remained at two," said Sim Moh Siong, a currency strategist at Bank of Singapore.

"There's a contrast here between a Bank of Japan that's still cautious in terms of rate hikes, and a (Federal Reserve) that's cautious in terms of rate cuts."

The focus now turns to BOJ Governor Kazuo Ueda's post-meeting news briefing on the timing and pace of future rate hikes.

TRUMP-XI MEET AND FED'S HAWKISH SURPRISE

In the broader market, there was muted reaction after a highly anticipated meeting between U.S. President Donald Trump and China's leader Xi Jinping in South Korea.

The meeting lasted nearly two hours. Neither side has yet released further details of the talks.

Still, the overall market mood was buoyant as investors bet on a further thaw in icy trade relations between the two nations.

Trump earlier said that a trade deal with China could be signed on Thursday, while the Chinese president similarly told his U.S. counterpart that trade negotiators from the world's two largest economies had reached a basic consensus on a deal.

That left the dollar clinging to overnight gains after some hawkish comments from the Fed, steadying near a two-week high at 99.09 against a basket of currencies.

The euro was up 0.1% at $1.1614, having weakened 0.43% in the previous session. Sterling languished near a 5-1/2-month low and last bought $1.3202.

The Fed on Wednesday lowered rates by 25 basis points as expected and said it will end its balance sheet drawdown on December 1.

But Chair Jerome Powell took the punch bowl away by saying a policy divide within the central bank and a lack of data due to a federal government shutdown may put another rate cut out of reach this year.

"Clearly, the FOMC is divided on the policy outlook from here and with the government in shutdown still, I think Powell wants to approach policy more cautiously," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

"We still expect a cut in December, but obviously with Powell's cautious comments, the risk is that a rate cut is delayed to 2026."

The market odds of the Fed delivering another quarter-point cut in December have eased to around 68%, having been nearly fully priced before Wednesday's decision.

Elsewhere, the Australian dollar rose 0.2% to $0.6588, while the New Zealand dollar similarly gained 0.2% to $0.5776.

Both Antipodean currencies were helped by a stronger yuan, which advanced to a near one-year peak against the dollar on Thursday on the Sino-U.S. trade optimism.

The onshore yuan rose to a high of 7.0955 per dollar, its strongest level since November 4, 2024, on hopes of a de-escalation in trade tensions.

(Reporting by Rae Wee; Editing by Kim Coghill and Jamie Freed)