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USD/JPY holds near 163.90 as Fed and BoJ decisions loom

CME FedWatch data point to about a 62% chance the Fed keeps rates unchanged in the 3.5% to 3.75% range, while markets look ahead to a BoJ decision expected to hold Japan’s 1% policy rate.

Reported · Written up by our desk · Major Pairs

USD/JPY traded around 163.90 on Tuesday, up 0.11% on the day, as investors kept positions light ahead of the Federal Reserve’s monetary policy decision on Wednesday and the Bank of Japan’s announcement on Friday, according to FXStreet.

FXStreet said the lack of near-term catalysts has left the pair in a wait-and-see mode, with the US Dollar moving without a clear direction. The US Dollar Index edged slightly higher, while markets were focused on how long US inflation is expected to remain above the Fed’s 2% target.

Citing CME FedWatch, FXStreet reported that markets assign roughly a 62% chance the Fed will keep interest rates unchanged within the 3.5% to 3.75% range, alongside pricing for a strong chance of a rate hike at the September meeting. FX Chair Kevin Warsh previously suggested forward guidance was not well-suited to the current policy environment, lowering expectations for detailed signaling.

On the Japan side, FXStreet said attention is turning to the BoJ, with expectations for the policy rate to remain at 1% Friday while maintaining a hawkish tone. Until both central banks act, FXStreet added that monetary policy divergence between the United States and Japan is likely to keep USD/JPY range-bound.

Latest closeUSD/JPY 163.75 ▼0.1%|Dollar index 101.51 ▲0.0%

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