The dollar is heading for its biggest yearly gain against the yen in at least 30 years as the Bank of Japan holds fire on rate rises

As the Federal Reserve and Bank of Japan pursue wildly different approaches to monetary policy, the dollar is on track for its biggest annual rise against the Japanese currency in at least three decades.

The US dollar is on track for its biggest annual gain against the Japanese currency in more than two decades. The Turkish lira is currently the worst-performing G20 currency against the dollar.

The US and Japan have different interest rate policies.

The Fed raised US interest rates by three quarters of a point on Wednesday in order to control inflation. Increasing demand for a currency is caused by rising interest rates.

The Fed's increase in borrowing costs could send the dollar to a new all-time high, according to strategists.

The conversations used to be 25 and 50 basis points, but are now 50 and 75, according to Joe Tuckey. Those who want to time the top of the dollar rally must hold on for a bit longer.

The Bank of Japan maintained its commitment to low rates. It will keep borrowing costs low in order to support the economy.

Unlike the Fed and the European Central Bank, the bank will continue to buy bonds. The BoJ must engage in a form of intervention if it wants to keep the yield on the 10-year Japanese government bond below 0.25.

The Japanese currency fell against the dollar in Friday's trade. It has lost a significant amount of money against the US dollar.

Chris Weston is the head of research for the foreign exchange broker Pepperstone. The Bank of Japan is the only central bank not to tighten its monetary policy.

The dollar is performing better against the Japanese currency. The dollar index is up 8.8% so far this year and is currently trading around 20 years old.

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