Yen Falls, While Dollar Steady Ahead Of Fed Decision

The yen fell for the fourth straight day against the dollar on Wednesday. USD/JPY strengthened as investors favored the greenback ahead of the Federal Reserve (Fed) rate decision scheduled for the North American session and the release of U.S. inflation data for May.

The yen found support as Japan’s producer price index (PPI) data came in higher than expected. The data showed that Japan’s producer prices rose 2.4% year-on-year in May, beating market expectations of 2.0%, which heightened market concerns that this could lead to higher consumer inflation.

The Bank of Japan is expected to keep its monetary policy unchanged on Friday. The interest rate divergence between the United States and Japan continues to weaken the yen (JPY), benefiting USD/JPY.

The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar (USD) against six major currencies, remained strong as strong U.S. May jobs data reduced the likelihood of a rate cut by the Federal Reserve in September. The probability of a rate cut of at least 25 basis points by the Federal Reserve in September has fallen to 52% from 67% a week ago, according to the CME FedWatch tool.

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