USD/JPY Steady Awaiting Fed Language Today

The dollar neared six-year highs against the yen on Wednesday as investors awaited fresh clues from the Federal Reserve on when a first hike in U.S. interest rates is likely to come.

The Fed’s Open Market Committee (FOMC) will conclude its regular two-day policy meeting later in the session and issue a policy statement. Policymakers will also release new economic and interest-rate projections extending through 2017.

The dollar came under pressure late on Tuesday after the Wall Street Journal said the U.S. central bank may maintain a pledge to keep near-zero rates in place for a “considerable time”. That would disappoint dollar bulls hoping for a more hawkish statement.

Markets have been bracing for the Fed to drop its promise to keep rates near zero for such a period after ending its bond-buying program. Fed officials have said they do not expect to raise rates until 2015, but recently strong U.S. data has led some of them to acknowledge they may need to act sooner.

The committee may also alter its depiction of the labor market to suggest further progress towards its goal of full employment.

“There has been some scaling back of expectations, but we are still bullish about the dollar going into the FOMC,” said Yujiro Goto, currency strategist at Nomura. “We expect the Fed to start raising rates from next year onwards and there will be changes to outlook to growth, inflation, and the dots for interest rate changes.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza