• The Japanese Yen recovers its early losses against the US Dollar and turns slightly positive.
• Investors expect the Fed and the BoJ to leave interest rates unchanged this week.
• The BoJ is expected to highlight economic concerns in the policy meeting amid higher energy prices.

The Japanese Yen (JPY) claws back its early losses against the US Dollar (USD) during the European trading session on Tuesday. The USD/JPY pair falls back to its opening level around 159.00 as the US Dollar turns upside down amid uncertainty surrounding the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is marginally down to near 99.70 after giving back its early gains.

According to the CME FedWatch tool, traders are confident that the Fed will hold interest rates steady in the March policy meeting. The tool also shows that the Fed will maintain the status quo till the September policy meeting.

The Fed is expected to leave interest rates unchanged on expectations that price pressures will remain higher in the near term amid higher oil prices in the wake of conflicts in the Middle East.

Apart from the interest rate decision, investors will focus on the Fed’s dot plot, which shows where policymakers see interest rates heading in the medium and long term.

Though investors have underpinned the JPY against the US Dollar, the former underperforms its other peers ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Thursday, in which the central bank is expected to leave interest rates unchanged at 0.75%. The BoJ is expected to leave the door open for more interest rate hikes, along with a warning that higher energy prices could act as a major drag on economic growth.