Dollar edges up to upper 123 yen range ahead of FOMC

The U.S. dollar rose slightly to the upper 123 yen range in subdued trading in Tokyo on Wednesday ahead of the end of the U.S. Federal Reserve’s policy-setting meeting later in the day.

At 5 p.m., the dollar fetched 123.64-66 yen compared with 123.32-42 yen in New York and 123.48-50 yen in Tokyo at 5 p.m. Tuesday. It moved between 123.37 yen and 123.71 yen during the day, changing hands most frequently at 123.43 yen.

The euro was quoted at $1.1270-1271 and 139.35-39 yen against $1.1243-1253 and 138.72-82 yen in New York and $1.1292-1294 and 139.44-48 yen in Tokyo late Tuesday afternoon.

After fluctuating narrowly in the lower 123 yen level, the dollar gained a modest footing in the afternoon as the Nikkei stock index trimmed some losses towards the end of trading, easing market participants’ risk-averse mood and prompting the dollar-buying for the yen, deemed a relatively safe asset, dealers said.

But intensified wait-and-see sentiment limited the dollar’s topside with many participants awaiting the outcome of the U.S. central bank’s Federal Open Market Committee meeting, they said.

“It it the calm before the storm,” said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow, adding the dollar-yen pair could turn volatile depending on the content of the FOMC’s statement and comments by Fed chair Janet Yellen at a post-meeting press conference.

Meanwhile, Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ, said traders will be particularly interested in FOMC members’ projections for future interest rates that will be released after the meeting, as only a few market players expect Yellen to hint at the timing of an expected rate hike at the press conference.

The dollar would be sold against the yen if market participants find that Fed policymakers are cautious about rate hikes, Uchida added.

The euro traded on a firm note against both the dollar and the yen on short-covering after weakening overnight due to lingering worries about the outlook for the Greek debt talks and sluggish German economic data, dealers said.

==Kyodo

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