09 November, 2018
USD/JPY rose to its highest rate in more than a month (114.073) as the U.S. Federal Reserve kept interest rates steady at 2.25% but reaffirmed its monetary tightening stance, setting the stage for a rate hike in December. The Fed has raised its key policy rate three times this year, and the market expects another rate hike in December on the back of a robust U.S. economy, rising inflation and solid jobs growth. The dollar has gained 2.24% versus the yen over the last 10 trading sessions due to the diverging monetary policies of the Fed and the Bank of Japan. While the Fed is on track to raise interest rates, the BOJ is expected to keep its ultra loose monetary policy due to low growth and inflation. The widening interest rate differential between U.S. and Japanese bonds has made the dollar a more attractive bet than the yen, which is often a funding currency for carry trades. Later this afternoon, investors could be expected to turn focus to PPI data for October in the US (13:30 GMT).