NEW YORK Stocks around the globe fell on Thursday after the Bank of Japan surprised markets by holding interest rates steady and declining to adopt more stimulus, pushing the yen sharply higher against major currencies.
The Japanese currency JPY= recorded its biggest one-day gains against the dollar, euro EURJPY= and sterling GBPJPY= since March 2011.
The BOJ's decision was particularly jarring in the face of soft global demand and after earlier media reports said the central bank intended to cut rates deeper into negative territory.
The dollar fell .DXY to a 2-1/2-week low against a basket of currencies, weighed down by the yen's strong move and gains in commodity-linked currencies such as the Australian AUD= and New Zealand dollars NZD=.
The U.S. Federal Reserve's decision on Wednesday to hold rates unchanged and its failure to signal strongly that a rate hike was coming at its next policy meeting in June also pressured the dollar lower, analysts said.
"The fact that the Fed was dovish and the BOJ did not deliver was certainly the hard combination that drove dollar/yen lower," said Sebastien Galy, a currency strategist at Deutsche Bank in New York.
Tokyo's Nikkei stock index .N225 slumped 3.6 percent overnight.
The Tokyo Stock Exchange will be closed for a national holiday on Friday and the benchmark Nikkei index ended the shortened trading week down 5 percent.
Nikkei futures NKc1 on the Chicago Mercantile Exchange were down 7 percent ahead of the market's open on Monday.
Wall Street closed sharply lower as positive sentiment from Facebook's upbeat first-quarter earnings gave way to worry over the BOJ's decision.
Facebook (FB.O) hit an all-time high of $120.79 a share after the company said on Wednesday that quarterly ad revenue jumped 57 percent. Its shares rose 7.84 percent to $116.73. [.N]
The Dow Jones industrial average .DJI fell 210.79 points, or 1.17 percent, to 17,830.76, the S&P 500 .SPX lost 19.34 points, or 0.92 percent, to 2,075.81 and the Nasdaq Composite .IXIC dropped 57.85 points, or 1.19 percent, to 4,805.29.
A gauge of stocks around the world .MIWD00000PUS fell 0.35 percent.
U.S. Treasury prices rose, with the two-year yield US2YT=RR hitting one-week lows as news of anemic U.S. economic growth in the first quarter increased traders' skepticism about a coming Fed rate hike and stoked safe-haven bids for U.S. government debt.
U.S. gross domestic product grew at an annual rate of 0.5 percent in the first quarter, its slowest pace in two years, while jobless claims for the latest week climbed from a 42-1/2-year low.
"It was a disappointing (growth) number and we are at full employment. I don't see the Fed going in June at this point," said John Bredemus, vice president of Allianz Investment-U.S. in Minneapolis.
Oil prices touched fresh 2016 highs for a third day in a row, bolstered by the weakening dollar as investors looked beyond record high U.S. crude inventories and relentless pumping by major producers to the prospect of future demand.
Brent futures LCOc1 rose 55 cents to $47.73 a barrel. U.S. crude CLc1 was up 42 cents to $45.75.
(Reporting by Dion Rabouin; Additional reporting by Richard Leong and Barani Krishnan in New York and Joshua Hunt in Tokyo; Editing by Paul Simao)
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