FX.co ★ Yen Pressured Ahead of Fed Decision

The Japanese yen traded around 163.7 per dollar on Wednesday, hovering near 40-year lows as investors awaited the Federal Reserve’s latest policy decision, with markets widely expecting no change in interest rates. Still, traders are pricing in roughly a one-third probability of a 25-basis-point hike at this meeting and assigning about an 80% chance of an increase in September. On the geopolitical front, the US military reported that it had successfully intercepted what it called a surprise Iranian attack targeting US forces stationed across the Middle East, rekindling regional tensions and driving oil prices higher. Domestically, the Bank of Japan is broadly expected to leave its policy rate unchanged on Friday, while keeping open the option of further rate hikes to help curb the yen’s slide. So far, verbal intervention by Japanese authorities has done little to support the currency, and the BOJ has remained noncommittal about the trajectory of its tightening plans.