US Dollar Soars Against Japanese Yen Ahead of Fed Policy Decision

The dollar moved higher against the Japanese yen on Monday, as investors expected that a possible interest rate hike from the Federal Reserve on Wednesday will boost the US currency. Anticipation for higher inflation under President-elect Donald Trump’s administration further lifted the dollar.

The greenback, which traded within a tight range against the euro today, soared to its highest level against the Japanese yen since February 8. Markets’ focus is now on the upcoming meeting of the Federal Open Market Committee, which ends on December 14. The meeting is expected to reveal that US interest rates will be raised, according to futures prices data from the CME Group FedWatch tool.

The monetary policy move would add more fuel to the dollar’s surge, which has been rising since Trump’s victory in the US presidential election on November 8. The President-elect, who comes in office on January, plans to increase fiscal spending and cut corporate taxes to stimulate the economy, which will raise inflation and will prompt the Federal Reserve to accelerate its pace of tightening its monetary policy.

The dollar’s rise against the yen is easing deflation pressure in Japan. The lower valuation of the Japanese currency is favored by the nation’s central bank, which has been working on depreciating the yen to keep its interest rates stable. Japanese exporters can remain more globally competitive with a lower yen’s value.

USD/JPY traded at 115.44 as of 16:00 GMT on Monday after touching 116.06 at 08:21 GMT, the pair’s highest level since February 8. USD/JPY opened trading this week at 115.42. Meanwhile, EUR/USD was at 1.0603, from 1.0593 at 13:05 GMT, the pair’s lowest level for the day. EUR/USD started the day at 1.0538.

The Dollar Index, which measures the performance of the US currency against a basket of its major peers, was at 101.22 as of 15:54, from an opening level at 101.64. The index’s highest point today was 101.76 at 12:30 GMT.

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