Traders Monitor Dollar-Yen Link Ahead of Central Bank Meetings

As traders await important central bank decisions, such as the Federal Reserve`s and the Bank of Japan`s midweek monetary policy meetings, the dollar and yen continue to be tightly correlated. The yen has risen from a 38-year low versus the dollar, giving the Japanese currency a reprieve from its recent surge. The BOJ has announced quantitative tightening plans, with a 63% chance of a 10 bps hike. However, questions remain about whether the BOJ will increase rates amid tepid economic growth. If the BOJ skips a hike, the dollar is likely to establish near-term support against the yen. The Fed is expected to stand pat on Wednesday, but markets are betting the US central bank will begin cutting rates at the following meeting in September.