Greenback Marginally Firmer With All On Fed Watch

The FOMC's monetary policy review takes centre stage, with the U.S. dollar edging ahead its G10 peers despite mild richening in Tsys. Meeting-dated OIS prices ~80bp of tightening come the end of today's FOMC deliberations, virtually unchanged from Tuesday close. The BBDXY index advanced to its best levels since Sep 7, when it printed all-time highs.

• The yen showed some strength in early Tokyo dealing as Bloomberg ran comments from Japan's ex-FX czar, who said the authorities could now intervene in currency markets at any time, following last week's rate check. The recovery in demand for the greenback inspired USD/JPY to move into positive territory, testing Y144.00 into the London morning.
• Yen traders were preparing for Thursday's BoJ meeting, after the central bank signalled continued dovish resolve by enforcing its 0.25% cap on 10-Year JGB yield through unscheduled bond purchase operations.
• The Aussie lagged its major peers after RBA Dep Gov Bullock said she was "not sure" the cash rate was "necessarily in restrictive territory yet," with spillover from yuan weakness also eyed. This resulted in new two-year lows for AUD/USD.
• Spot USD/CNH saw fresh buying interest taking the pair above CNH7.0500 and to new cyclical highs. While the PBOC set to yuan reference rate below sell-side estimate, the mid-point was fixed at the highest level since 2020.
• Overnight implied volatilities across Asia-Pac G10 currencies soared in anticipation of the Fed's rate hike. USD/JPY, AUD/USD & NZD/USD implieds all hit levels last seen on the eve of the Fed's Jun 16 meeting.
• The announcement of the FOMC's monetary policy decision and the subsequent press conference with Fed Chair Powell will dominate today's data docket. Local risk events include speeches from RBA's Bullock & ECB's de Guindos.