The USD/JPY pair remained under selling pressure around 146.45 during the early Asian session on Wednesday (September 17th). The US dollar (USD) weakened against the Japanese yen (JPY) as investors continued to assess the possibility of additional interest rate cuts by the Federal Reserve (The Fed) in the coming months.
Investors appear to be unwinding long USD positions ahead of the Fed's interest rate decision on Wednesday. The market fully anticipates the Fed will cut interest rates by 25 basis points (bps) at its September meeting, the first cut since December, with some still expecting a larger cut of 50 bps, according to the CME FedWatch tool.
"Expectations for a 25 basis point rate cut are very clear at this point," said Peter Grant, vice president and senior metals strategist at Zaner Metals, adding that one or two more rate cuts are likely before the end of the year.
Traders will be closely monitoring the FOMC Press Conference and Summary of Economic Projections (SEP), or "dot plot," for clues on the direction of US interest rates. Any dovish tone from Fed officials could weaken the US dollar in the near term.
On the other hand, the resignation of Japanese Prime Minister Shigeru Ishiba added to market uncertainty and could fuel uncertainty over the timing and pace of interest rate hikes by the Bank of Japan (BoJ). This, in turn, could drag the JPY lower and help limit the pair's decline.
The Bank of Japan is expected to keep interest rates steady on Friday. The market is awaiting BoJ Governor Kazuo Ueda's post-meeting press conference for clues on when the BoJ will begin raising interest rates, which has been delayed since January while officials assess the impact of tariffs. (alg)
Source: FXstreet
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