Yen slips as traders await BoJ and Fed moves

The Japanese yen extended its recent slide on Tuesday, weakening to about 157.73 per US dollar as traders positioned for a series of major central bank decisions later in the week. The USD/JPY pair has been trading with a positive bias for a third straight day, recovering from an over one‑month low near 156.00 touched last week and consolidating above the mid‑157.00s.

Spot prices around the 157.70 region were up just over 0.10% on the day, but moves remained limited as investors hesitated to take strong directional views before the policy announcements. The latest adjustment marked a modest daily decline for the yen, adding to losses seen on Monday and moving it further away from last week’s one‑month low.

Markets widely expect the Bank of Japan to leave its policy rate unchanged at 1.25% at the meeting ending Friday. However, attention is focused on any signals about the outlook for further tightening, with traders assigning slightly better‑than‑even odds to a potential rate hike in December.

Japan’s services‑sector inflation gauge, which rose 3.7% year on year in September, has helped keep expectations for additional policy tightening alive. At the same time, speculation that the BOJ may avoid aggressive rate hikes is supporting carry trades and weighing on the yen, limiting its ability to recover against the dollar despite recent volatility.

While the yen slipped, the US dollar remained firm, with the dollar index (DXY) holding near a one‑week high at 102.04. A tech‑led rebound in US equities revived risk appetite after last week’s flight to safety, encouraging investors to move back into riskier assets and supporting the greenback.

The dollar has attracted follow‑through buying for a third consecutive day amid expectations that the Federal Reserve will maintain a relatively hawkish stance. Elevated energy prices and associated inflation concerns have underpinned this view ahead of the Fed’s upcoming policy decision, which is another key event traders are watching this week.

The euro edged lower in this environment, slipping to about $1.1165 and approaching a near two‑week low. Sentiment toward the single currency has been pressured by stress in French bond markets and broader concerns about France’s fiscal health.

Investors are also awaiting the European Central Bank’s policy announcement this week, looking for any guidance on the interest‑rate path. Market participants are expected to scrutinize communications from the ECB, the Fed and the BOJ for signals on how long higher rates might persist and how that could shape currency moves into year‑end.