Fed Rate Hold Sends Yen Tumbling Amid Rising US-Iran Tensions

The US Federal Reserve's decision to hold interest rates steady at 3.50%-3.75% on Wednesday has boosted the US Dollar (USD) against the Japanese Yen (JPY), causing the USD/JPY pair to rise near 163.50 during Asian trading hours on Thursday.

Although widely expected, the Fed's decision had three dissents voting for a rate increase, which may boost odds of a September hike. Fed Chairman Kevin Warsh stated that while the Fed won't provide hints on where rate policy is heading, it will take necessary steps to meet its 2% inflation target.

Rising tensions in the Middle East could also support the Greenback against the JPY. The US military began launching strikes against Iran late Wednesday, retaliating against Iranian missile attacks on American forces in the region.

Traders are now awaiting the Bank of Japan's (BoJ) interest rate decision later on Friday, where analysts expect no change in rates at 1.0%. However, a hawkish hold could amplify tightening expectations and potentially lead to further hikes with hawkish communication.