Dollar-Yen Pair Sees Wild Week Ahead Amid FOMC and BOJ Meetings

The dollar-yen pair is hovering around the 163 level, a historically weak yen level not seen since December 1986. This comes as traders brace for back-to-back monetary policy decisions from the Federal Reserve and the Bank of Japan. The FOMC meets on July 28-29, with rates widely expected to remain on hold, but there's a surge in probability of a surprise hike to 31.5% amid renewed inflation concerns tied to rising oil prices.

Japan's Finance Minister Satsuki Katayama reaffirmed the government's readiness to take 'decisive action' if needed, though markets see the next intervention trigger around the 165 level. However, some argue that the current pace of gradual yen depreciation makes intervention extremely difficult.

The BOJ convenes on July 30-31, where a hold is also the consensus call, but persistent yen weakness keeps additional rate hike expectations simmering. Markets are pricing in a cumulative 0.25 percentage points of rate hikes by the BOJ this year.