USD/JPY flat-lines below the 148.00 mark amid the cautious mood, Fed rate decision looms
- USD/JPY remains flat around 147.83 as investors prefer to wait on the sidelines.
- Markets see the Federal Reserve (Fed) keeping interest rates unchanged at 5.25%-5.50% at its September meeting.
- Japan's top currency diplomat emphasized that Japanese authorities are dealing with FX moves with a high sense of urgency.
- Market players await the Fed meeting on Wednesday ahead of the Bank of Japan (BoJ) on Friday.
The USD/JPY pair trades sideways in the 147.70-147.85 region during the early European session on Wednesday. At the press time, the major pair is trading at 147.83, losing 0.01% on the day. The market turns cautious ahead of the key Federal Reserve (Fed) interest rate decision on Wednesday in the North American session.
The Federal Reserve (Fed) is widely anticipated to hold the interest rate unchanged in the 5.25% to 5.5% range. According to the CME Fedwatch Tool, the odds of keeping rates unchanged in its September meeting is 99%. However, the probability of another rate hike had been lowered in the November and December meetings, according to the CME FedWatch Tool. This, in turn, could weigh on the US Dollar (USD).
On Tuesday, US Treasury Secretary Janet Yellen said that given the economy was operating at full employment, US growth needed to slow to a rate more in line with its potential growth rate to bring inflation back to target levels, per Reuters. Apart from this, the US Census Bureau showed on Tuesday that US Building Permits rose to 1.543M in August, above expectations and previous reading, while Housing Starts fell slightly to 1.283M.
On the JPY’s front, markets turn cautious amid the fear of FX intervention. Earlier on Wednesday, Japan's top currency diplomat Masato Kanda, delivered verbal intervention comments, emphasising that Japanese authorities are dealing with FX moves with a high sense of urgency. Additionally, US Treasury Secretary Janet Yellen stated that the US would show understanding over another yen-buying intervention by Japan "depends on the details" of the situation.
On Friday, the Bank of Japan (BoJ) will announce its interest rate decision. The Bank of Japan is widely expected to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. Markets are eager to see whether Governor Kazuo Ueda would deliver any fresh signals regarding the timing of a policy move and other tweaks to its Yield Curve Control (YCC) during his post-meeting press conference.
About the data, the Japanese Ministry of Finance revealed on Wednesday that the August Balance of Trade was ¥-930.5S, worse than the expected ¥-659.1B. Meanwhile, exports were -0.8% YoY vs. -0.3% previously, which was better than the -1.7% estimated. Imports grew to -17.8% from -13.6%, above the forecast of -19.4%.
Market participants will monitor the highly-anticipated Fed meeting decision on Wednesday. While BoJ will announce its monetary policy decision on Friday. Traders will take cues from these events and find trading opportunities around the USD/JPY pair.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
