Dollar sags as Fed decision looms; yen and Aussie rise

The U.S. dollar slipped from near a one-week peak versus major peers on Wednesday, with traders on tenterhooks before a looming Federal Reserve rate decision that should also give clues on the future policy path, Reuters reported.
The yen outperformed, seeing a sudden burst of strength mid-morning Japan time, with traders on alert for possible intervention around the Fed meeting.
The dollar index — which gauges the greenback against a basket of six counterparts that includes the yen, euro and sterling — eased 0.14% to 111.33, but still not far below Tuesday’s high of 111.78, which was the strongest level since Oct. 25.
The index rode a yo-yo overnight, dropping fast in the European open only to recover those losses after U.S. data pointed to continued price pressures, dampening speculation of a Fed pivot this year. U.S. job openings unexpectedly rose, suggesting wage growth remains elevated, while construction spending staged a surprise rebound.
The yen has been particularly vulnerable to dollar strength, spurring the Ministry of Finance and Bank of Japan to intervene to support the currency in September for the first time since 1998. Japanese authorities are widely considered to have waded in several times again in October to pull the yen back from 32-year lows just shy of 152 per dollar, although they declined to confirm any action.
On Wednesday, the Japanese currency jumped suddenly by about half a yen to 147.4 per dollar. It then extended those gains, with the dollar last down 0.55% at 147.40 yen.
The euro edged up 0.15% to $0.9888, but still close to the previous session’s one-week low at $0.98535.
Sterling rose 0.17% to $1.1505, but remained not far from Tuesday’s one-week low of $1.14365.
The Bank of England announces its policy decision on Thursday, and markets expect a 75-bps increase there as well, followed by a slowdown to a 50-bps pace in December.
The Australian dollar was little changed at $0.63945, consolidating near a one-week low. The Reserve Bank of Australia opted to keep its pace of rate hikes at 25bps on Tuesday, despite consumer inflation running at a 32-year high.
The kiwi dollar rose 0.16% to $0.58485, garnering support after an upbeat jobs report reinforced the case for a super-sized increase in interest rates this month from the Reserve Bank of New Zealand.