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Dollar holds after Fed keeps rates, Yen defense fails
The Fed held its 3.50% to 3.75% target range, with the Yen trading near 163.5, down 0.2% on the day as the market pared near 36% hike odds after the announcement.
The Federal Reserve held its target range at 3.50% to 3.75% for a fifth straight meeting, according to FXStreet, but USD/JPY still softened as the update did not provide the type of guidance traders needed to price a clean Yen rebound.
FXStreet said the pair slipped from just under 164.0 to the 163.5 area, then to just above 163.0 during the chair's Q&A, and it was last around 163.5 late in the session, down 0.2% on the day. The decision was carried on a nine-to-three vote, with three members dissenting for a quarter point and the closest split in years.
FXStreet linked the move to rate expectations after the announcement, noting that Fed-related repricing came out of the front end while September odds already near 80% before the vote were reduced. The outlet also reported that the two-year Treasury yield fell about 4 basis points while the 30-year rose more than 9 basis points, a curve dynamic that can be unfavorable for a Yen carry defense when the Fed delays or complicates hike signals.
While the press conference was described as the more consequential part of the session, FXStreet said Fed Chair Warsh declined to characterize the decision as a pause and would not spell out what would trigger a September shift. The outlet added that Japan's Ministry of Finance spent about 11.7 trillion Yen buying its currency between late April and late May, yet USD/JPY remained well above the level after that intervention, with speculative Yen shorts still elevated.
Latest closeUSD/JPY 163.42 ▼0.2%