USD/JPY Holds Steady at 155.37 as Markets Await Fed Decision

The USD/JPY pair held steady around 155.25 during Wednesday's Asian session as market participants awaited the Federal Reserve's interest rate decision, due to be announced later today. Following that, investor focus will shift to the Bank of Japan's decision on Friday.

The Fed is expected to raise its benchmark interest rate by 25 basis points to a range of 3.75%–4.00%. These expectations strengthened after US inflation data last week showed persistent price pressures, with core inflation rising again in August.

A Fed rate hike—the first in three years—is viewed as a response to inflation that remains stubbornly high. If Fed Chair Kevin Warsh delivers a hawkish statement during the press conference, the US dollar could gain ground against the yen in the short term.

From Japan, the market also anticipates that the Bank of Japan will raise interest rates by 25 basis points at Friday's meeting, moving from 1.00% to 1.25%. If this materializes, Japanese borrowing costs will reach their highest level since April 1995.

However, any strengthening of the yen may be limited, as the BoJ's move has largely been priced in by the market. Analysts believe the primary focus lies not just on the rate hike itself, but also on the tone and guidance provided by BoJ Governor Kazuo Ueda regarding the pace of future increases.

Newsmaker Analysis: The steady movement of USD/JPY at 155.25 indicates that the market is awaiting confirmation from two major central banks. If the Fed raises rates and Warsh maintains a hawkish stance, USD/JPY could strengthen again. Conversely, if the BoJ signals a more aggressive tightening path, the yen could find support, potentially capping the pair's gains. (asd)