USD/JPY steadies around 130.00 as investors await Fed’s meeting, DXY gets volatile

• USD/JPY is stuck in a nine-pip range ahead of Fed’s monetary policy announcement.
• A rate hike of 50 bps by the Fed is on the cards.
• BOJ’s ultra-loose monetary policy may continue to hurt the Japanese yen.

The USD/JPY pair is displaying back and forth moves in a narrow range of 129.97-130.06 as investors have preferred to stay on the sidelines till the announcement of the monetary policy by the Federal Reserve (Fed).

Investors are bracing for a tight liquidity environment as the Fed is going to elevate its interest rates by 50 basis points (bps), as per the market consensus. Soaring inflation and continuous job additions in the labor market are compelling for a rate hike but what matters the most is the guidance from the Fed. Aggressive hawkish guidance along with a jumbo rate hike would drive the asset to new highs.

The major is performing lackluster after printing a multi-year high of 131.25 on Thursday. The imbalance movement in the major has come after the Bank of Japan (BOJ) hold the interest rates unchanged in its monetary policy meet last week. An accommodative policy stance by the BOJ to spurt the growth in its economy is going to weaken the Japanese yen further. Also, the galloping commodity prices are hurting the households’ real income and widening the fiscal deficit.

Meanwhile, the US dollar index (DXY) is displaying some wild moves in the Asian session. The asst has slipped below 103.50 and is getting volatile at elevated levels. Usually, a volatile move after printing fresh highs, signals that the asset has already registered its peak and inventory distribution is a better option now.