- The Japanese Yen (JPY) is rising for a third straight day
- BoJ is expected to leave rates unchanged but keep hopes alive for another hike
- The US Dollar (USD) is rising versus its major peers
- A Fed rate cut is fully priced in
The US dollar Japanese yen (USD/JPY) exchange rate is falling for a third straight session. The pair fell 0.68% in the previous session, settling on Tuesday at 146.61. On Wednesday at 17:30 UTC, USD/JPY trades -0.04% at 146.35 and trades in a range of 146.21 to 146.68.
The yen gained ground yesterday and is extending gains today, supported by Federal Reserve – Bank of Japan policy divergence as both central banks announce rate decisions this week.
The BoJ is widely expected to leave rates unchanged at 0.5% and signal cautious optimism that the economy is showing resilience to the hit from US tariffs. This message could keep hopes alive for another rate hike from the BoJ later this year.
However, BoJ Governor Ueda will likely sound cautious as tariffs work their way through the economy. The big question is how soon the BoJ will resume rate hikes, which have been paused since January.
The US dollar is falling against the yen but rising against major peers. The US dollar index, which measures the USD against a basket of peers, is rising 0.12% on Wednesday at 96.76 after two days of losses.
The US dollar is recovering from an almost 2-month low as investors await the Federal Reserve interest rate decision later today at 18:00 GMT. The Fed is expected to cut interest rates by 25 basis points to 4% to 4.25%.
The meeting comes after recent data pointed to weakness in the US jobs market, but as inflation also continued to rise in March. US CPI rose to 2.9% in August, in line with forecasts.
The Fed rate cut is fully priced in, so attention will be on Federal Reserve Chair Jerome Powell’s comments. The market is pricing in 68 basis points of Fed cuts before the end of the year, on a total of 147 basis points of cuts by the end of next year.