By John McCrank

NEW YORK (Reuters) -The Japanese yen tumbled against the dollar on Friday after the Bank of Japan bucked a wave of tightening and stuck with its ultra-accommodative stance, adding to soaring volatility in currency markets hit by a series of rate hikes this week.

Currency markets have been roiled by one of the biggest runs of monetary policy tightening in decades, including the Federal Reserve’s mid-week three-quarters-of-a-percent rate increase, its biggest since 1995, and the Swiss National Bank’s surprise decision to hike rates by 0.5%.

Japan’s central bank went against the current on Friday, keeping all of its policy settings unchanged and vowing to defend its bond yield cap of 0.25% with unlimited buying.

The BOJ’s move knocked the yen, which on Wednesday hit a 24-year low of 135.6 per dollar, broadly lower, last down 2.24% against the greenback at 135.105 yen, and 1.35% lower versus the euro.

“Today we’re seeing a rebalancing of the market. It’s been a very volatile week,” said Simon Harvey, head of FX analysis at Monex Europe. “Markets are still adjusting to the central bank meetings from throughout the week.”

The dollar rose off a one-week low against major peers, following a two-day slide after the Fed’s mid-week rate increase of 0.75%, a move that was anticipated by markets as the Fed attempts to tame stubbornly high inflation.

The dollar index, which measures the currency against a basket of six rivals, was up 1.069% to 104.99, putting it on track for a weekly rise of around 0.75%.

U.S. Treasury yields held at lower levels on Friday after a volatile week that saw yields hit more than 10-year highs on expectations of aggressive rate hikes, and then fall on concerns about how these will impact growth.

The Swiss National Bank’s surprise decision to raise rates by 0.5% continued to reverberate through markets, with the euro losing half a percent and the franc heading back towards two-month highs hit immediately after Thursday’s announcement.

The euro was last down 0.91% at $1.0456 versus the dollar.

Against the Swiss franc, the common currency was down 0.46% at 1.0148 francs per euro. The franc rocketed to a two-month high on Thursday after the rate hike and boosted by a sense among investors that the SNB would not try and stop a strengthening franc as it has in the past.

Giving up earlier gains, the dollar lost 0.43% to 0.9656 francs, after tumbling the most in seven years overnight.

“The surprise rate hike in Switzerland, as well as the European Central Bank’s announcement that it is working on a tool to prevent the fragmentation of the European bond markets, will help to limit USD strength around current levels,” strategists at UBS’s Global Wealth Management’s Chief Investment Office said in a research note.

Sterling dropped 1.37% to $1.2182, giving back nearly all of its overnight gains from when the Bank of England decided to lift rates again, albeit by less than many in the market had expected, along with a hawkish signal about future policy action.

Currency markets are also having to contend with a massive drop in risk sentiment that has sent equity markets tumbling.

The Australian dollar, which is very sensitive to the broad global investment mood, fell 1.87% to just under $0.6914 after stock markets in Asia tumbled and Wall Street was mixed following a steep selloff on Thursday.

(Reporting by John McCrank in New York and Tommy Wilkes in London; Editing by Raissa Kasolowsky, Edmund Blair and Toby Chopra)