Dollar Holds Gains as BOJ Decision Looms, Yen Near Two-Week Low

The US dollar held onto its seven-week high on Thursday after the Federal Reserve's first rate hike in three years, while the Japanese yen remained near a two-week low ahead of the Bank of Japan's policy decision on Friday.

The Fed voted unanimously to raise its policy rate by 25 basis points to 3.75%-4.00%, with officials pencilling in one more increase this year. The dollar index was around 100.30, little changed after rising 0.7% overnight.

The yen's recent rally has been driven by a more hawkish outlook for Japanese rates, coordinated Japan-U.S. intervention, and expectations that Japanese investors could repatriate overseas assets. Markets expect the BOJ to raise its policy rate on Friday to a 31-year high and signal that further increases remain possible as it responds to persistent inflation pressures.

The expansion of China's onshore central clearing system to more foreign currencies may support Beijing's push to increase the currency's international use, but the yuan remained resilient at 6.71 against the dollar.