USD/JPY surges above 148.40 amid the fear of intervention, BoJ rate decision eyed

The USD/JPY pair surges above the 148.00 mark after bouncing off the 147.47 low during the early Asian trading hours on Thursday. The upside in the US Dollar (USD) is bolstered by the hawkish stance of the Federal Reserve (Fed) following Wednesday’s policy meeting. As of writing, the pair is trading at 148.41, up 0.05% on the day. However, traders remain cautious as Japanese authorities made a verbal intervention early on Wednesday.

At its September meeting, the Federal Reserve (Fed) kept interest rates unchanged at 5.25-5.50%. Officials are becoming more confident that they could lower inflation without harming the economy or causing major job losses. According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated.

Furthermore, the Fed revised its Summary of Projections (SEP), indicating that Fed officials estimate the interest rate to hit 5.1% by the end of 2024 (from 4.6% prior). That said, the higher for longer rate narrative has propelled the US Dollar against its rivals.

On the other hand, the Bank of Japan (BoJ) interest rate decision will be the highlight on Friday. BoJ is widely expected to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. The Japanese central bank has previously declared that monetary policy shifts would not be considered until local wage and inflation data meet its projections.

Apart from this, traders turn to a cautious mood amid the fear of verbal intervention. Former top currency diplomat Takehiko Nakao told Reuters on Wednesday that Japanese authorities could intervene again to support the yen if it declines further. Earlier, Japan's top currency diplomat Masato Kanda said that Japanese authorities are dealing with FX moves with a high sense of urgency. This, in turn, exerts some selling pressure on the Japanese Yen (JPY) and acts as a tailwind for USD/JPY.

Moving on, the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales will be due on Thursday. The attention will shift to Friday's Bank of Japan (BoJ) meeting decision. Traders will take cues from these events and find trading opportunities around the USD/JPY pair.