USD/JPY revisits two-week high of 150.00 with Fed policy in focus

• USD/JPY rises to near 150.00 ahead of the Fed’s monetary policy outcome at 18:00 GMT.
• Investors will pay close attention to Fed’s dot ploy as the central bank is expected to leave interest rates steady.
• The Japanese administration sees downside economic risks due to accelerating inflationary pressures and trade war.

The USD/JPY pair jumps to near the psychological level of 150.00 in North American trading hours on Wednesday. The asset strengthens as the US Dollar (USD) bounces back ahead of the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, recovers more than 0.4% from the five-month low of 103.20.

The Fed is almost certain to keep interest rates steady in the range of 4.25%-4.50% for the second time in a row. Therefore, investors will focus majorly on the Fed’s dot plot and economic projections. Investors are mixed over whether Fed officials will guide a dovish interest rate outlook amid easing inflationary pressures or a hawkish one due to accelerating consumer inflation expectations.

The Consumer Price Index (CPI) data for February showed that the core inflation – which excludes volatile food and energy prices – rose by 3.1%, the lowest level seen since April 2021. Meanwhile, the preliminary University of Michigan (UoM) five-year Consumer Inflation Expectations for March accelerated to 3.9% from 3.5% in February.

Meanwhile, the Japanese Yen (JPY) weakens as Japan’s government has warned of downside risks to the economy due to accelerating inflationary pressures and the United States (US) President Donald Trump-led-tariff war. Japan’s Cabinet Office reported in its monthly March report, released during European trading hours on Wednesday, that Trump’s trade war and Chinese economic uncertainty could result in a decline in exports. However, officials were confident that the economy will continue recovering at a “moderate pace” with the improving “employment and income” conditions.

Earlier in the day, the Yen remained volatile as Bank of Japan (BoJ) Governor Kazuo Ueda guided that uncertainty surrounding Japan's economy, prices remain high after the central bank decided to keep interest rates steady at 0.5%, as expected.