USD/JPY: Japanese Yen Gains as Focus Shifts to Rate Decisions by Fed, Bank of Japan

Huge two-day timeline for the dollar-yen as both sides of the pair are about to shake the scene with interest rate decisions.

• The USDJPY pair pushed lower on Tuesday as traders on both sides were getting ready to get sandwiched between two major central bank decisions. Stateside, the Federal Reserve today is expected to reduce its benchmark interest rate by 25 basis points in efforts to boost the US economy and make borrowing more affordable. But with recent inflation data, a rate cut isn’t guaranteed.
• In Japan, the Bank of Japan early on Thursday is expected to keep interest rates flat at current levels as officials struggle to juggle rising inflation and a wobbling economy. Japan’s central bank is way behind the curve on interest rates and forex traders are secretly hoping to see a surprise rate hike, maybe even to the tune of 25 basis points. Higher interest rates typically boost the valuation of the local currency.
• Against that mixed-bag backdrop, the dollar-yen pair slipped from a three-week high of ¥154.50 to current market prices of ¥153.50. With both sides of the pair looking into market-shaking decisions, it’s best for traders to carefully inspect their portfolios and make sure no excessive risk has been taken in the lead-up to the events. Seesawing volatility is to be expected not just in the dollar-yen pair but in the forex markets in general.