Dollar Retreat Ahead of FOMC Minutes Sparks Yen Gains
The US Dollar retreated ahead of the Federal Open Market Committee's (FOMC) minutes release, causing the USD/JPY pair to edge lower on Wednesday. At 159.10, it traded down 0.32% from the previous day.
The Japanese Yen, however, outperformed its major peers as traders became cautious about building bearish positions against it due to concerns over further foreign-exchange intervention and hawkish Bank of Japan expectations.
The Greenback's decline was influenced by the recent dovish repricing of Federal Reserve rate expectations. The US economic data has reduced the likelihood of an interest rate hike at the September meeting, but persistent inflation concerns, particularly those linked to higher energy costs, keep expectations of a future rate hike alive.
Analysts at MUFG note that markets have continued to price in more BoJ tightening for the next 12 months, which has helped stabilize USDJPY around the 160.00 level and contained further Yen depreciation for now.