The Japanese Yen (JPY) edges higher against the retreating US Dollar (USD) during the Asian session on Wednesday and moves away from a one-week low touched the previous day. The upside for the JPY, however, seems limited as traders might opt to move to the sidelines ahead of key central bank events.

The Federal Reserve (Fed) will announce its decision at the end of a two-day meeting later today. This will be followed by the Bank of Japan (BoJ) policy update on Thursday. Given that both central banks are expected to keep interest rates steady, investors will look for cues about the policy outlook.

This will influence the USD and the JPY price dynamics, which should provide some meaningful impetus to the USD/JPY pair.

In the meantime, diminishing odds for an immediate interest rate hike by the BoJ, amid signs of cooling inflation in Japan and domestic political uncertainty, might hold back the JPY bulls from placing aggressive bets.

Furthermore, the optimism led by the recent US trade deals with Japan and the European Union (EU) might contribute to capping the safe-haven JPY.

Meanwhile, investors now seem convinced that the Fed will keep borrowing costs higher for longer amid a still resilient US labor market and expectations that higher US tariffs would reignite inflationary pressure during the second half of the year. This, in turn, favors the USD bulls and supports prospects for the emergence of some dip-buying around the USD/JPY pair.

Source: FXStreet