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Bank of Japan Pushes Yen Further Away From 100

Luc Novovitch | Photographer's Choice | Getty Images

The yen moved further away from the key 100-level against the U.S. dollar on Friday after the Bank of Japan (BOJ) left its monetary policy unchanged and said consumer prices in Japan were likely to rise almost 2 percent by the end of the coming three years.

Japan's currency strengthened to a one-week high on Friday at around 98.24 per dollar, up about 1.6 percent from where it traded on Monday at about 99.88, just shy of the psychological level of 100 to the dollar that currency traders say is proving hard to crack.

(Read More: Japan to Hit 2% Inflation by End of 3 Years: BOJ)

"The first reaction of the forex market is always the wrong one," said Uwe Parpart, managing director of Reorient Financial Markets, talking about the yen's reaction to the BOJ's monetary policy decision.

"I don't believe this is going to hold. As soon as these options barriers are gone the dollar/yen will break through 100," he said, referring to market positions that are preventing the yen's fall.

(Read More: Consumer Prices in Japan Fall for 5th Straight Month )

The yen has been flirting with the 100-handle versus the dollar since BOJ governor Haruhiko Kuroda unveiled a massive stimulus plan in early April to meet the central bank's 2 percent inflation target. Analysts say that options barriers may be a reason why the 100-level appears out of reach for now.

(Read More: Why the Hype Over Dollar-Yen at 100 Is Overdone)

The BOJ kept monetary policy unchanged at a board meeting on Friday, broadly meeting analyst expectations. And in its semi-annual outlook, the central bank said prices were likely to rise to around 2 percent during the latter half of the coming three-year period.

One Month USD/JPY Chart

Currency analysts say the U.S. gross domestic product data due later on Friday could be the next key driver for dollar/yen, with any weakness in the numbers expected to encourage the yen-buying.

(Watch This: Yen Continues to Retain Safe Haven Status)

Recent weak economic numbers out of the world's largest economy have raised concerns about the growth outlook.

"If U.S. data continually comes in weaker than expected then that would be a real problem for Japan," said Parpart.

(Read More: Ssshh! Why Japan Is Keeping Quiet on the Yen)

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