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USD/JPY sinks to one-week low ahead of Fed interest rate decision, BoJ in focus

  • The Japanese Yen strengthens for the second consecutive session, driving USD/JPY to a one-week low.
  • US Dollar stays under pressure despite upbeat Retail Sales and Industrial Production data.
  • Markets fully price in a 25 bps Fed rate cut, with focus on Chair Powell’s tone and updated dot plot on Wednesday.

The Japanese Yen (JPY) is extending its advance against the US Dollar (USD) on Tuesday, with the USD/JPY pair falling for a second consecutive day. At the time of writing, USD/JPY is trading around 146.56, down nearly 0.55% on the day and marking its lowest level since September 9.

The decline reflects a broader sell-off in the Greenback, with the US Dollar Index (DXY) slipping over 0.50% to trade near 96.80, its lowest level since July 3. Investors appear to be unwinding long-USD positions ahead of the Federal Reserve’s (Fed) monetary policy decision on Wednesday, shrugging off stronger-than-expected US data.

Surprisingly, upbeat US macro data failed to arrest the slide. August Retail Sales and Industrial Production both beat expectations, but the Greenback failed to gain traction, suggesting markets are more focused on the Fed’s dovish pivot.

Markets have fully priced in a 25-basis-point interest rate cut, with investor focus turning to the updated dot plot and Chair Jerome Powell’s forward guidance. In the previous meeting, Powell described the current policy stance as “modestly restrictive” and noted that decisions going forward would be data-dependent, citing the importance of upcoming inflation and labor market reports.

Since then, a string of soft US economic data has reinforced expectations for policy easing. Signs of a cooling labor market and deteriorating consumer sentiment have emerged, even as inflation continues to run above the Fed’s 2% target.

On the Japanese side, the Yen is drawing support from firmer domestic bond yields and positioning ahead of Friday’s Bank of Japan (BoJ) policy decision. While the BoJ is widely expected to leave its short-term policy rate unchanged at 0.50%, Governor Kazuo Ueda is likely to strike a cautiously optimistic tone, acknowledging resilient economic conditions while flagging ongoing uncertainties.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.64%-0.31%-0.44%-0.11%-0.02%0.04%-0.79%
EUR0.64%0.34%0.07%0.52%0.68%0.66%-0.14%
GBP0.31%-0.34%-0.20%0.19%0.35%0.33%-0.49%
JPY0.44%-0.07%0.20%0.40%0.50%0.30%-0.30%
CAD0.11%-0.52%-0.19%-0.40%0.10%0.11%-0.67%
AUD0.02%-0.68%-0.35%-0.50%-0.10%0.07%-0.82%
NZD-0.04%-0.66%-0.33%-0.30%-0.11%-0.07%-0.77%
CHF0.79%0.14%0.49%0.30%0.67%0.82%0.77%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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