USD/JPY stays afloat in positive territory near 109.50 ahead of FOMC
- USD/JPY recovered portion of weekly losses on Wednesday.
- US Dollar Index struggles to find direction, holds near 93.20.
- 10-year US T-bond yield is posting modest gains ahead of FOMC.
The USD/JPY pair closed the first two trading days of the week in the negative territory but managed to reverse its direction on Wednesday. As of writing, the pair was up 0.27% on a daily basis at 109.51.
The positive shift witnessed in market sentiment following the People's Bank of China's (PBoC) decision to inject short-term cash seems to be making it difficult for the JPY to find demand. Reflecting the improving market mood, US stock index futures are up between 0.3% and 0.55%. Additionally, the benchmark 10-year US T-bond yield is rising 1%, helping USD/JPY cling to its daily gains.
In the meantime, the Bank of Japan (BoJ) left its policy settings unchanged as expected but Governor Haruhiko Kuroda reiterated that they will ease the policy further without hesitation as needed, putting additional weight on the JPY.
DXY stays calm ahead of FOMC
On the other hand, the US Dollar Index (DXY) is moving sideways near 93.20 for the second straight day on Wednesday as investors refrain from taking large positions ahead of the FOMC's policy announcements.
Market participants don't expect the Fed to change its policy rate but the revised Summary of Projections, the so-called dot plot, will be looked upon for fresh insights regarding the policy outlook. In case the Fed confirms the beginning of asset tapering before the end of the year, USD/JPY could extend its rally. However, a dovish tone amid concerns over a slowdown in the global economy could trigger a USD selloff and force USD/JPY to turn south.
Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot.
Technical levels to watch for