Bitcoin prices climbed higher today, surpassing $17,000 after the Bank of Japan raised the cap on yields paid by long-term government bonds, a move that many have described as being sudden and unexpected.
The world’s most prominent digital currency reached $17,045.90 earlier today, according to CoinDesk data.
At this point, it had climbed roughly 4.7% after reaching an intraday low of $16,288 yesterday evening, additional CoinDesk figures showed.
Following this notable increase, the digital currency pulled back somewhat, trading close to $16,900 at the time of this writing.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
BOJ Announcement Surprises Markets
The BOJ shocked markets recently when Governor Haruhiko Kuroda announced that the financial institution was raising the cap on 10-year government bonds to 50 basis points above or below the zero percent target.
Previously, the target range allowed for the yield to move 25 basis points in either direction.
“Today’s step is aimed at improving market functions, thereby helping enhance the effect of our monetary easing,” Kuroda stated. “It’s therefore not an interest rate hike.”
Japan’s central bank has been using an approach called yield curve control (YCC), which involves purchasing and selling bonds in order to keep their yields close to a specific target level.
To keep yields down, the financial institution commits to buying bonds at a target price, which in turn corresponds with the target yield.
Alternatively, if a central bank wants to keep these yields from decreasing too much, it could pledge to sell bonds at a target price.
Certain markets reacted strongly to this development, with the U.S. dollar falling more than 4% against the Japanese yen, according to Google Finance.
The Nikkei 225, a stock index containing blue-chip Japanese stocks, also moved lower, declining over 2% following the announcement, additional Google Finance data reveals.
The recent weakness in the U.S. dollar may have proved bullish for bitcoin, as strength in the greenback has been described as providing bearish headwinds for the world’s most prominent digital currency.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.