The yen tumbled, sliding to the weakest in more than 3 1/2 years against the euro, as the Federal Reserve's unexpected hold in monetary policy sent stocks higher and damped demand for haven currencies.

The yen slid against all 16 of its major peers after a Bank of Japan policy maker said pressure may mount to expand stimulus. The dollar fell to a seven-month low against the euro after Fed policy makers maintained monthly bond purchases at $85 billion. New Zealand's dollar rose after data showed the economy expanded. Malaysia's ringgit surged the most since 1998 and India's rupee advanced. The pound weakened after U.K. retail sales unexpectedly fell.

“With risk sentiment likely to continue to be supported in the very near term by this more dovish Fed policy outlook, that should keep low-yielding currencies like the yen on the back foot along with the dollar,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Yen weakness is likely to be more concentrated against the most high-beta, high-risk currencies, particularly those of current-account deficit countries and emerging markets.”

Eoin Treacy's view The US Dollar's drop against the majority of currencies was one of the most notable results of the Fed's decision to delay tapering. For Japan, the prospect of a stronger currency as a result of the Dollar's weakness, is a situation they are no longer willing to tolerate. The Yen weakened today, unwinding the majority of yesterday's strength against the Dollar. This suggests that regardless of external circumstances the BoJ remains committed to its policy of devaluing the Yen.

While the Dollar and Yen has been in mostly in balance over the last few months, we get a clearer picture when we look at other Yen crosses. For example, the Euro broke out of a four-month range against Yen today, reasserting medium-term demand dominance. The Pound and Swiss Franc have similar patterns.

The Australian Dollar, New Zealand Dollar, Canadian Dollar and Singapore Dollar has all found support in the region of the respective 200-day MAs against the Yen and are rallying back towards the upper side of their four-month ranges. The Korean Won is testing the upper side of its medium-term range against the Yen.

The above charts emphasise just how committed the BoJ is to ensuring a weak currency as it attempt s to exit the decades long deflationary environment. The stock market, in local currency terms, continues to respond favourably to the Yen's weakness, not least because the majority of foreign investors participate on a hedged basis.