The dollar drifted narrowly around ¥103 in late Tokyo trading Wednesday, with traders retreating to the sidelines ahead of a decision by the U.S. Federal Reserve on whether to begin winding down its quantitative easing.
At 5 p.m., the dollar was at ¥102.99-103.03, against ¥102.94-95 at the same time Tuesday. The euro was at $1.3769-3772, against $1.3777-3777, and at ¥141.81-84, against ¥141.82-85.
The greenback recouped overnight losses to return to a narrow range around ¥103 before the U.S. central bank announces the outcome of a two-day Federal Open Market Committee meeting that wraps up Wednesday U.S. time.
In New York trading overnight, the dollar slid to levels around ¥102.50, dampened by a weaker than expected reading in the U.S. consumer price index for November. The CPI was flat, against market expectations of a 0.1 percent rise from October.
In Tokyo, the U.S. unit was buoyed by the Nikkei average’s sharp advance, but its topside was capped around ¥103.
The currency market was little affected by a government report that the trade deficit in November came to ¥1.29 trillion, compared with analysts’ forecast of ¥1.32 trillion.
“With an FOMC statement to be released early Thursday morning Japan time, traders remain cautious about active trading,” an official at a major Japanese bank said.
The weak CPI reading fueled speculation that the Fed will delay the tapering. Yet market participants forecast that the tapering will start by March at the latest.
“The market has already factored in the Fed tapering,” an official at a foreign brokerage firm said.