USD/JPY consolidates above 156.00 in countdown to BoJ/Fed policy interest rate policies

• USD/JPY trades in a tight range above 156.00 with a focus on BoJ/Fed policy meetings.
• The BoJ is expected to raise interest rates by 10 bps and reveal bond-tapering plans.
• Investors see the Fed maintaining a status quo.

The USD/JPY pair trades back and forth in a tight range above the crucial support of 156.00 on Monday’s European session. The asset shifts to the sidelines with investors focusing on the interest rate announcements by the Bank of Japan (BoJ) and the Federal Reserve (Fed), which are scheduled for Wednesday.

The Japanese Yen (JPY) steadies after appreciating for straight three weeks against the US Dollar (USD) as its safe-haven appeal was upbeat amid political uncertainties in various economies and China’s economic woes.

Going forward, investors will focus on the BoJ meeting in which policymakers are expected to vote for hiking interest rates by 10 basis points (bps) in an attempt to pivot towards policy normalization. The BoJ will also unveil plans to taper bond-buying operations, which will add to an improvement in Yen’s appeal.

Meanwhile, slight recovery in the US Dollar has brought a temporary halt in major’s upside. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, moves higher to near 104.50.

The US Dollar rises as investors turn cautious ahead of the Fed’s monetary policy meeting in which officials are expected to leave interest rates unchanged in the range of 5.25%-5.50%. Investors will keenly focus on the interest rate guidance, which is expected to remain dovish. The Fed is expected to acknowledge progress in disinflation and highlight upside risks to labor market conditions.