USD/JPY Steadies Near 163.60 After Split Fed Hold

The Federal Reserve's decision to keep interest rates unchanged in a 3.50%, 3.75% range has resulted in a steadying of the USD/JPY exchange rate, which is currently trading near 163.60.

This outcome was decided by a 9-3 vote, with three policymakers favouring a 25-basis-point increase. The Fed noted that economic activity is expanding at a solid pace, but inflation remains elevated versus its 2% objective, and there are concerns about supply shocks such as higher energy costs.

The USD/JPY pair is currently sitting near the 50 mark on the Relative Strength Index (RSI), indicating balanced momentum after a pullback. The Fed's decision to hold rates steady with hawkish dissent suggests that US interest rates will remain elevated, which is expected to keep the US dollar strong against the Yen.

The recent data shows US core inflation remains stubborn at 2.7%, reinforcing the view that the Fed is not done tightening. For derivative traders, using bull call spreads on USD/JPY can capture potential upside while limiting risk, and buying short-dated knock-out barrier options with a protective trigger set just below the key 162.75 support level is recommended.