Cautious forex market awaits Fed, BoJ decisions

NEW YORK (AFP) – The dollar rose modestly against the euro but dipped against the yen Tuesday ahead of key central bank meetings in the US and Japan.

Foreign exchange pairings avoided big swings on the eve of policy decisions by the Bank of Japan and Federal Reserve.

Markets are girding for potentially dramatic moves by the Bank of Japan, which has seen stimulus efforts partly countered by strengthening of the yen. That has raised the odds of a policy surprise from the BOJ on Wednesday, analysts said.

But BK Asset Management analyst Kathy Lien said hopes that the BOJ will take measures to weaken the Japanese currency could fall flat.

“Bolder more aggressive action is needed to put a top in the yen and a bottom in USD/JPY, but the chance of that happening is slim and we believe that at the end of the BOJ meeting, investors will be disappointed,” Lien said.

She added that the Fed was unlikely to hike rates on Wednesday, but the dollar could still rally if more than one member of the Fed s monetary policy board dissents or if Yellen strikes a hawkish tone in a news conference.