Tonight, the Federal Reserve will announce another increase in interest rates, and a few hours later, the Bank of Japan will make a statement. In anticipation of the climax, the USD/JPY pair shows volatility.

What helps the dollar?

The US central bank began a 2-day meeting on monetary policy on Tuesday. The long-awaited verdict on interest rates will be announced this evening.

Most analysts predict that the central bank will raise the indicator by 75 bps again.

There is also an opinion that the Fed may further strengthen its anti-inflationary campaign, since previous measures were ineffective.

Recall that the latest data on inflation in the United States greatly disappointed the market. The August report published last week showed an insignificant slowdown in consumer price growth.

Last month, inflation in America was 8.3% year-on-year, which is still significantly higher than the Fed's target of 2%.

Given the disappointing statistics, some market participants began to incline to the fact that at the September meeting, the US central bank will begin to act more aggressively and raise rates by 100 bps.

Increasing speculation on this topic dispersed ahead of the yield of 10-year US bonds. Yesterday, the indicator jumped to an 11-year high of 3.59%.

The surge in profitability provoked a sharp positive dynamics of the dollar. The DXY index tested a 2-week peak at 110.27 on Tuesday.

According to tradition, the greenback made the steepest ascent against the Japanese currency. On the first day of the Fed meeting, the USD/JPY asset was again above the 144 mark.

The dollar also held steady at this level at the beginning of Asian trading on Wednesday. Additional support for the greenback was provided by expectations of a dovish speech by Bank of Japan Governor Haruhiko Kuroda.

The BOJ's monetary policy report will be released tomorrow morning. Most experts predict that the Japanese central bank will maintain its ultra-soft monetary rate.

In this case, the divergence in US and Japanese interest rates will increase even more, which will contribute to the further rally of the USD/JPY pair.

What supports the yen?

However, not all experts share optimism about the dollar-yen asset. There is an opinion that in the short term, the quote may face serious obstacles that will limit its growth.

This is exactly what happened today towards the end of the Asian session. The USD/JPY pair turned sharply to decline and plunged below the 144 mark.

Several factors put pressure on the dollar. One of them is another wave of speculation about a possible currency intervention.

On Tuesday evening, the former head of the currency department of the Japanese Ministry of Finance Tatsuo Yamasaki said that the Japanese authorities will not wait for the green light from the United States and will resort to unilateral intervention when they see fit.

"The exchange rate check initiated by the Bank of Japan last week means that the government is now ready to take action at any time. I do not see any serious obstacles to intervention, especially since Japan previously conducted almost all of its interventions unilaterally," he stressed.

According to Yamasaki's forecast, Japanese politicians will press the button if another strong speculative movement of the yen occurs over the next few days.

In addition to the growing risk of intervention, the pressure on the USD/JPY pair is now exerted by an unexpected increase in expectations regarding a possible change in the rhetoric of the BOJ.

Of course, given Kuroda's previous dovish statements, no one expects him to suddenly change his shoes and move to the hawk camp. But we cannot rule out another option: the BOJ may well take a neutral position.

The probability of such a scenario has increased dramatically in the light of the latest inflation data. According to the report of the Japan Statistics Bureau, the national consumer price index was 3% in August, which is higher than the forecast and the July value of 2.6%.

In addition, the core inflation indicator, which excludes food and oil prices, also increased in August. It rose to 1.6% against 1.2% recorded a month earlier.

As we can see, inflationary pressure in the country is growing, and it is increasingly difficult for the BOJ to ignore this problem and postpone its solution. Therefore, there is hope that this month the BOJ will still consider the option of switching to a neutral monetary policy.

In this case, the yen may receive short-term support, and the USD/JPY pair will have another rollercoaster ride.