Japanese Yen flattens against US Dollar around 159.00 in countdown to Fed’s policy

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The Japanese Yen (JPY) trades almost flat around 159.00 against the US Dollar (USD) during the Asian trading session on Wednesday. The USD/JPY pair consolidates as investors await the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

The Japanese Yen trades calmly near 159.00 against the US Dollar ahead of the Fed’s policy announcement.
Both the Fed and the BoJ are expected to leave interest rates unchanged this week.
Global oil concerns have eased slightly following the reopening of Hormuz for some nations.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto two-day’s losses around 99.50. The USD Index has corrected in the last two trading sessions after a sharp rally, as the opening of the Strait of Hormuz by Iran for some countries has slightly eased global supply concerns.

In the policy meeting, investors expect the Fed to leave interest rates unchanged again in the range of 3.50%-3.75% as the recent surge in oil prices due to Middle East conflicts has prompted inflation expectations in the United States (US) and the entire world.

Therefore, market participants will pay close attention to the Fed’s dot plot and comments regarding the monetary policy outlook. According to the CME FedWatch tool, the Fed is unlikely to cut interest rates anytime before the September policy meeting.

Meanwhile, the Japanese Yen (JPY) trades broadly firm as Bank of Japan (BoJ) Governor Kazuo Ueda has expressed confidence that prices and wages will continue to accelerate ahead of the monetary policy announcement on Thursday. “Expect underlying inflation to converge toward our target in the latter half of fiscal 2026 through fiscal 2027,” Ueda said on Tuesday.

In the policy meeting on Thursday, the BoJ is expected to leave borrowing rates steady at 0.75% while leaving the door open for further interest rate hikes.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).