The yen continued to hover near a 10-month low on Wednesday, as the dollar held steady against a basket of peers ahead of the Federal Reserve’s much-awaited rate announcement later in the day.
As traders awaited the Federal Reserve’s interest rate announcement, the U.S. dollar index, which compares the dollar to a basket of competitors, remained largely unchanged at 105.17.
As new statements about possible involvement from U.S. and Japanese authorities poured in, the focus remained on the yen.
Markets anticipate that the Fed will almost definitely maintain rates at their current range of 5.25% to 5.50%, focusing attention on the institution’s forward guidance.
According to the CME FedWatch tool, futures markets are pricing in a 30% possibility of a quarter-point increase in November or a 40% chance it would occur in December.
According to Carol Kong, economist and currency strategist at the Commonwealth Bank of Australia, “we anticipate the FOMC to maintain its forecast of one additional 25 hikes by year’s end, though it will not, in our view, follow through with it.”
She added that after a hawkish FOMC meeting, the dollar/yen may experience some upward pressure.
The yen last traded at approximately 147.83 against the dollar, off its low of 147.92 from Tuesday but still close to its 10-month low ahead of the FOMC statement.
Masato Kanda, the chief financial diplomat for Japan, issued further cautions on Wednesday. He claimed that the Japanese government is constantly in contact with foreign and American politicians over currencies and closely monitors market movements with a “high sense of urgency.”
U.S. Treasury Secretary Janet Yellen responded overnight that it “depends on the details” of the scenario when asked whether Washington would demonstrate understanding over another intervention by Japan in which it purchases yen.
The Bank of Japan is anticipated to maintain its ultra-low interest rates on Friday and reassure the markets that monetary stimulus will continue amid economic uncertainty despite growing speculation of a potential earlier-than-expected exit from the ultra-loose policy.
The offshore yuan remained stable in other parts of Asia as China matched market expectations by maintaining its benchmark lending rates on Wednesday. However, it later decreased by 0.1% to 7.3103 per dollar.
While the New Zealand currency was flat, down from its two-week high against the dollar on Tuesday, the Australian dollar, a proxy for China’s growth, dropped by about 0.1% in the Asian afternoon.
The euro price was $1.0679, and the pound price was $1.2388.
The final piece of inflation data before the Bank of England decides on interest rates on Thursday, the UK August CPI, which will be issued on Wednesday, will be closely watched by the market.
Regarding cryptocurrencies, bitcoin BTC=BTSP was trading at about $27,137, down from its Tuesday three-week high.
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