USD/JPY Holds Steady Ahead of Fed Decision

The USD/JPY pair remains relatively unchanged at 163.80 on Wednesday, as investors await the Federal Reserve's (Fed) monetary policy decision later in the day.

The Fed is widely expected to keep its benchmark interest rate within the 3.5%-3.75% range, but markets still price in a 25-basis-point rate hike, with a 33.7% chance according to the CME FedWatch Tool.

Fed Chair Kevin Warsh's comments will be closely monitored for guidance on the path of monetary policy in coming months, even if rates are left unchanged, a hawkish tone could continue to support the US Dollar (USD).

However, with markets entering the meeting with a relatively hawkish bias, the main risk for the US Dollar may actually lie in a dovish surprise, which could trigger a sharp downside correction in the Greenback, particularly against the Japanese Yen (JPY).