USD Hits Seven-Week High as FOMC Meeting Sparks USD/JPY Tensions

The US Dollar has reached a seven-week high after the FOMC meeting, which is largely driven by its performance against the Japanese Yen. This development comes as no surprise given Scott Bessent's comments last week that 'he knows what the Bank of Japan is going to do.' The Fed's decision to raise interest rates again has put pressure on the BoJ to follow suit, but investors are now waiting to see if they will signal another hike or have a different plan in store.

The DXY basket, which measures the strength of the US Dollar against a basket of other currencies, has broken above the 100.00 psychological level and is trading at its highest since the intervention in the Japanese Yen following the prior FOMC meeting in July. This marks a significant technical breakout, but analysts are cautious about reading too much into it given the complex dynamics at play.

USD/JPY remains a key focus for investors, with many hoping to see a decline below 155.00 to signal a shift in control on the short-term trend. However, if the BoJ pledges continued rate hikes to normalize Japanese policy, this could potentially upset longer-term bulls and push the pair lower.