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Yen Firms on BOJ's Open-Ended Asset Buying Pledge for 2014

Photo: Gyro Photography | Amana Images | Getty Images

The yen briefly fell against the dollar on Tuesday after the Bank of Japan surprised markets by adopting an open-ended commitment to buy assets, but later regained ground as the new scheme for additional purchases only comes into effect next year.

The BOJ, which has been under intense political pressure to overcome deflation, also doubled its inflation target to 2 percent as had been widely expected.

The dollar rose to as high as 90.18 yen right after the BOJ's decision, nearing a 2-1/2 year high of 90.25 yen that had been set on Monday.

The greenback, however, later sagged back down and last fetched 89.19 yen, down 0.5 percent on the day.

The BOJ met expectations by setting a 2 percent inflation target and delivered a surprise by adopting the open-ended pledge to buy assets, said Roy Teo, FX strategist for ABN AMRO Bank in Singapore.

Still, one point to note is that asset buying under the open-ended pledge is only set to start from 2014, he said.

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"From 2014 onwards it's positive... From now until then they are not doing anything more aggressive to weaken the yen," Teo said.

Stop-loss selling added to the dollar's drop, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.

(Read More: Picture This: The dollar at 100 Yen)

"The BOJ increase in asset purchases is only commencing in 2014. So no strong immediate increase in easing," Halley said.

"This was combined with the whole street having dollar/yen stops under 89.50 yen," he added.

The euro rose to as high as 120.18 yen after the BOJ's decision, but last stood at 118.75 yen, down 0.6 percent on the day.