The dollar rose to a six-year high versus the yen amid speculation on whether the Federal Reserve will change its pledge in a policy statement to keep interest rates low for a “considerable time.”
The Fed’s Open Market Committee (FOMC) will conclude its regular two-day policy meeting later in the session and is likely to discuss the timing of its first rate hike. Policymakers will also release fresh economic and interest-rate projections, extending their forecasts through 2017.
The dollar climbed against most major currencies on Wednesday as investors awaited the Federal Reserve’s latest guidance on U.S. interest rates, with many expecting it to discuss steps towards the normalisation of its ultra-loose monetary policy.
Markets have been bracing for the Fed to drop its promise to keep rates near zero for such a period after ending its bond-buying programme. Fed officials have said they do not expect to raise rates until 2015, but recently strong U.S. economic data has led some of them to acknowledge they may need to act sooner than they previously thought.
The committee may also alter its depiction of the labour market to suggest further progress towards its goal of full employment.
In contrast to the Fed, the Bank of Japan is expected to maintain its ultra-easy monetary stance and could even take additional steps, notwithstanding signs that it could be reaching the limits of its power to reflate the economy. This month, Japan’s central bank bought bills at negative yields, essentially paying banks for the privilege of lending them cash.
Against the yen, the dollar added about 0.15 percent on the day to 107.25 yen, moving back towards a six-year peak of 107.39 set last Friday after dropping as low as 106.81 yen overnight. The euro slipped to $1.2955 after climbing to a near two-week high just shy of $1.3000 on Tuesday.