The dollar was trading 0.23 percent higher vs the Japanese yen at 106.33 as of 04:50 GMT on Tuesday, with markets on hold as Fed’s monetary meeting gets closer.
The US regulator is expected to raise interest rates for the first time this year by 25 basis points, leaving the benchmark rate in a range between 1.50 and 1.75 percent.
A rising interest rate environment is negative for the precious metal as it dampens demand for non-yielding assets such as gold, while boosting its base currency, the US dollar.
According to Fed funds CME Group’s FedWatch program, market players are currently pricing in a nearly 94 percent chance of a rate hike this week. It would be the first hike of 2018.
Stock investment company Stifel said on Monday that “the Federal Reserve is likely to reiterate a data-dependent stance and an expectation for ‘gradual’ movements in the removal of accommodation amid still lingering skepticism among some policymakers as to the direction of the underlying economy and inflation.”
The greenback came under pressure in the first week of this trading week as the political scene in the United States remains mixed following last week’s sacking of Secretary of State Tillerson.
The US dollar index, which measures the greenback against six major currencies, was trading 0.19 percent higher at 89.50 by the time of this writing.
No relevant economic data is scheduled on Tuesday. The pair is expected to remain on a negative vias for the time being as the greenback struggles to find support. The rate hike is widely expected and therefore it has been fully assimilated by the dollar’s current price.
Following Fed’s monetary policy announcement, we could expect further losses for the USDJPY, which later on could be again corrected.