The dollar climbed back moderately above ¥98 in Tokyo trading Tuesday as traders retreated to the sidelines ahead of a policy-setting meeting of the U.S. Federal Reserve.
At 5 p.m., the dollar stood at ¥98.13-15, up from ¥97.95-97 at the same time Monday. The euro was at $1.3271-3273, against $1.3268-3268, and at ¥130.23-27, up from ¥129.99-130.01.
The dollar was aided by rebounds in Tokyo stocks, traders said.
“Yen selling was prompted as risk appetite was revived somewhat on the back of firm stock prices both at home and abroad,” an official at a currency brokerage said.
The dollar was also pushed up against the yen by the U.S. currency’s advance versus the Australian dollar following remarks from Reserve Bank of Australia Gov. Glenn Stevens suggesting a further rate cut, traders said.
Still, the dollar’s resilience was limited as traders refrained from actively building fresh positions before the Federal Open Market Committee began a two-day meeting later Tuesday.
The dollar’s topside was capped by speculation that the FOMC may revise its “forward guidance” on monetary policy to indicate a willingness to keep its policy rate target near zero for an extended period, traders said.
“The FOMC could underline its cautious stance on a rate hike,” a foreign exchange strategist said, adding that the dollar is expected to drift around ¥98 at least until the FOMC announces the meeting’s outcome Wednesday.
Meanwhile, an official at a major Japanese bank said that “any major change (to the forward guidance) is unlikely, given that a news conference by Fed Chairman Bernanke is not scheduled this time.”