SYDNEY/WELLINGTON: The Australian and New Zealand dollars hit one-week highs against the yen on Wednesday after the Bank of Japan (BoJ) overhauled its massive stimulus programme while recommitting to the fight to lift inflation.

The BoJ decided to adopt a target for long-term interest rates, maintained the 0.1 percent negative interest rate, abandoned its base money target and set a “yield curve control” under which it will buy long-term bonds to keep 10-year yields at 0 percent.

It also committed to pushing inflation above its 2 percent target and keeping it there, a bold step aimed at reviving inflation expectations among firms and households.

In response, the yen fell broadly and the Australian dollar rose 0.7 percent to 77.40 yen. That was the highest since Sept. 12 and its third straight day of gains. The New Zealand dollar added 0.6 percent to 74.79 yen.

Among G10 members - the G7 plus Belgium, Netherlands and Sweden - the Aussie and the New Zealand dollar are the best performing currencies this year, up 3.6 and 6.9 percent respectively. That has forced central banks in both countries to lower rates to restrain their currencies.

On Wednesday, the kiwi fell 0.4 percent against the US dollar, to $0.7289.

New Zealand government bonds gained, sending yields around 1 basis points lower across the curve.

Australian government bond futures were mixed, with the three-year bond contract up 1 tick at 98.41. The 10-year contract was down 1.5 basis points at 97.86.

The Aussie was down 5 ticks on the greenback at $0.7550, after rising during the past two sessions.—Reuters