Dollar firms as Fed holds rates and USD/JPY breaks above 160

The dollar held firm on Wednesday after the Federal Reserve kept interest rates unchanged and signaled that inflation remains elevated.

The Fed left the federal funds target range at 3.5% to 3.75% and said global energy prices are contributing to inflation pressure. Reuters reported that the hawkish tone helped keep the dollar near a two-week high.

At the same time, the Japanese yen weakened past 160 per dollar, a level traders have been watching closely for possible intervention. Bloomberg reported the yen moved beyond that threshold and said Japanese officials are standing by to respond to foreign-exchange moves as needed.

The move has put the foreign-exchange market back on alert. A sustained break above 160 can increase pressure on Japanese authorities to consider support for the currency, especially if the decline continues.

The Bank of England is also due to make its next rate decision on Thursday, another event that could influence currencies. For now, the key market story is the combination of a hawkish Fed hold and a weaker yen.

Investors will be watching whether Tokyo comments more forcefully on the yen and whether the dollar’s strength extends into the next session.