Dollar steadies as yen approaches seven-month high ahead of Fed and BOJ rate decisions

The U.S. dollar remained stable Monday while the Japanese yen held gains near a seven-month high as market participants evaluated potential interest rate increases from major central banks. Global monetary policymakers are addressing erratic pricing pressures linked to ongoing U.S.-Israel military operations in Iran, which have pushed oil prices above $100 per barrel. This volatility has disrupted expected rate trajectories and triggered selloffs in long-end bonds. The European Central Bank increased rates last week and signaled further hikes. Consequently, the Federal Reserve faces a decision this Wednesday, widely expected to move higher. Similarly, the Bank of Japan is anticipated to raise rates on Friday. The Bank of England is expected to hold steady on Thursday, though votes remain close. Following data released Friday showing accelerated U.S. consumer prices in August, traders increased betting on a rate hike. According to the CME FedWatch tool, participants priced in an 86% probability of an increase this week and another move higher later in the year. Shane Oliver, chief economist at AMP, noted that while waiting is possible, it complicates timing due to the upcoming October midterms and risks moving too late by December.