The US dollar rose against the Japanese yen on Tuesday to touch its highest level since March 21. The greenback became stronger against the yen as tradersâ appetite for risk grew ahead of a Federal Reserveâs meeting that will decide the latest monetary policy move from the central bank.
Despite weak manufacturing and inflation data on Monday, investors still believe that the Federal Reserve will likely raise US interest rates in June after maintaining them in May. The Federal Open Market Committee started a meeting that lasts for two days earlier today, and is widely expected to keep its monetary policy unchanged.
The CME Group FedWatch tool, which calculates probabilities of rate moves from the Federal Reserve, shows a 95.2% chance of maintaining interest rates at a range between 0.75% and 1.00% in the current meeting. However, the Federal Open Market Committee may hand out signals on the next interest rate hike in its statement on Wednesday. Traders believe there is a 67.4% chance of deciding a 0.25% increase when the committee meets again on June 13.
The demand for the safety of the Japanese yen further weakened as anticipation built up for major upcoming economic releases in the United States, which are expected to reflect the US economic health. Analysts believe that the nonmanufacturing purchasing managersâ index from the Institute for Supply Management, which will have a new reading published tomorrow, may increase to 55.8 in April from 55.2 in March.
On Friday, the nonfarm payroll data from the Bureau of Labor Statistics could show an increase of employment in April to 185,000 following a gain of 98,000 jobs in the previous month. Meanwhile, the unemployment rate might edge slightly higher to 4.6%. The current week will give a strong boost for the US dollar if these economic releases were positive.
USD/JPY traded at 112.11 as of 17:00 GMT on Tuesday from 112.29 at 10:15 GMT, the pairâs highest level since March 21. USD/JPY began trading today at 111.86.
The Dollar Index, which tracks the performance of the US currency against its major peers, was at 99.11 as of 16:55 GMT today, from 99.07 yesterday.
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