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The Japanese local currency posted higher against the dollar on Friday, due to disappointing policy easing measures by the Bank of Japan.

Investors had been expecting for more radical stimulus measures.

The US dollar tumbled 1.7% to three-week lows, last trading at 103.46 yen. Greenback initially climbed to 105.75 yen following immediately the BoJ’s announcement, but later fell to an almost three-week trough of 102.705 yen.

As of 07:40 GMT, forex pair USD/JPY is down 1.70% at 103.48. In late Asian trade, the pair hit its lowest since July 12 at 102.72, and consequently consolidated at 103.69, lower 1.50%.

USD/JPY was likely to find support at 102.41, July 12’s low and resistance at 106.54, the peak of July 27.

Meanwhile, EUR/JPY lost 1.37% to 115.02 as of 08:41 GMT.

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Investors are now looking ahead to the release of US economic growth data or the second quarter gross domestic product figures due later in the day.

The Federal Reserve had claimed an upbeat outlook this week, as mentioned in its policy statement that the near-term threats to the economic outlook had gone, and that the job market is doing better.

BoJ Policy Easing Measures

Heng Koon How, a senior FX investment strategist for Credit Suisse, said the bank clearly upset by only expanding its ETF purchases and keeping policy rate and annual pace of monetary base increase unchanged.

Japan’s central bank posted a meager increase in purchases of exchange-traded funds (ETFs) at the conclusion of its policy meeting today, but kept its base money goal at 80 trillion yen and the pace of other asset purchases.

The BoJ also held negative interest rates unchanged at -0.1%.

“We can continue to expect elevated volatility and possible short-term risk of yen strength back towards possibly 100,” How added.

Trading conditions in the greenback against the yen had been extremely illiquid steering into the BoJ’s statement, with the bid to ask spread widening to 0.40 yen at some point, though later narrowing back to an estimated 0.02 yen as trading conditions regularized.

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The decision disappointed markets’ expectations for a stimulus package of almost 28 trillion yen as pledged by Prime Minister Shinzo Abe this Wednesday to support the economy.

Sources have shared on Thursday to Reuters that the government package comprises direct fiscal spending of only 7 trillion yen, which is likely to disappoint investors as well in hopes for larger expenses, given the massive headline figure.

The policy statement came after figures revealed that Japan’s household spending dipped 1.1% last month, compared to forecasts for a 0.4% surge and after a 1% decrease in June.

Separate data report presented that the Asian nation’s retail sales lost a yearly rate of 1.4% in June, compared to predictions of a 1.5% decline.

“There had been pretty strong hopes for combined measures,” Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation. “There is strong appreciation pressure on the yen now that such hopes have dissipated.”

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