Yen Retreats as Dollar Rises Ahead of Fed Rate Decision

The Japanese yen retreated from its seven-month high on Tuesday, while the U.S. dollar rose to nearly two weeks' high as markets awaited the Federal Reserve's interest rate decision and the Bank of Japan meeting.

Investing.com's Fed Rate Monitor showed a 92.1% probability of a rate hike into the 3.75%-4.00% range, up from 85.5% the previous day. Markets are also pricing a 53.4% chance of another hike at the October meeting.

The U.S. dollar index rose 0.12% to 99.60, while the EUR/USD pair slipped 0.1% to 1.1539 and the GBP/USD pair fell 0.20% to 1.3474. The yen's retreat comes as Japan's 10-year government bond yield reached a 30-year high of 3.025%, adding to the broader rise in global yields.

Asian currencies weakened, with the South Korean won down 0.9% and the Indian rupee also weakening. DBS Senior Economist Radhika Rao expects yields to remain elevated in the near term as they track U.S. bond markets.