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USD/JPY edges higher after Fed holds rates steady

The Fed kept rates at 3.5% to 3.75% and signaled a hawkish tilt as persistent inflation and energy costs keep the door open for a September move.

Reported · Written up by our desk · Major Pairs

The USD/JPY pair rose modestly to around 163.50 in Asian trading on Thursday as the US dollar strengthened versus the Japanese yen following a hawkish hold from the US Federal Reserve, according to FXStreet.

The Fed maintained its policy rate at 3.5% to 3.75% at its July meeting and suggested the direction of travel could shift on persistent inflation and higher energy costs, FXStreet noted. While the Fed would not provide forward guidance on where policy is headed, it said it would take steps needed to meet its 2% inflation target, with three dissenting votes backing a potential rate increase.

Markets now look ahead to a Bank of Japan decision later on Friday, with no change in rates expected and the BoJ widely anticipated to keep its rate at 1.0%. Traders are focused on whether the BoJ pairs a steady decision with hawkish communication, FXStreet said.

FXStreet also pointed to geopolitical risk in the region as a factor that could influence the dollar versus the yen, with reports that the US began launching strikes against Iran late Wednesday in retaliation for Iranian missile attacks on American forces. The article said tensions like that can boost the greenback against the JPY as traders position ahead of the BoJ outcome.

Latest closeUSD/JPY 163.42 ▼0.2%

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