Yen surrenders half its gain ahead of expected BoJ hold on Friday

• USD/JPY closes above 157.50 after recovering roughly half its two-session decline.
• An October BoJ rate rise is not forecast by any economist surveyed by Bloomberg.
• Wednesday's Fed statement precedes Tokyo CPI and the BoJ decision.

The losses recorded by USD/JPY on 22 and 23 October were roughly halved by Monday's recovery. Buying of the Yen in Tokyo had pushed the pair below 157.00 to its weakest level since 18 September. With the Fed decision two days away, Monday's advance took it from just above 156.50 to just above 157.50, leaving it near the session high at the close.

A September increase took the Bank of Japan (BoJ) rate from 1% to 1.25%, while BoJ Governor Ueda has said consecutive hikes are unnecessary. Following that September move, another increase on Friday would constitute back-to-back tightening, so the Yen is not expected to have a BoJ rate rise to trade on. Economists polled by Bloomberg unanimously expect no increase in October, with most looking to December instead.

The September decision passed by 7-2, with both dissenters opposing the rate increase. For Friday, previews suggest that any dissent would instead favour a hike and come from BoJ board members Takata and Tamura. A vote for higher rates could advance the timing of the December increase that Yen traders are awaiting.

Tokyo data and central bank decisions set the agenda

Due at 23:30 GMT on Thursday, Tokyo's October Consumer Price Index (CPI) and Japan's September unemployment rate will be the final data releases before Friday's BoJ decision. At 06:30 GMT on Friday, BoJ Governor Ueda will then hold his press conference. His signals on December are the remaining Tokyo input for USD/JPY to price in.

When the Fed releases its statement at 18:00 GMT on Wednesday, it is expected to leave its rate range unchanged at 3.75%-4.00%. The next US releases, at 12:30 GMT on Thursday, are third-quarter growth and September's Personal Consumption Expenditures Price Index (PCE). Each will inform the case for a December Fed rate rise.

USD/JPY remains below key moving averages

Both the 200-day Exponential Moving Average (EMA) and the 50-day EMA sit just below 158.00, beyond the high reached on Monday. Following the decline on 22 October, the pair registered its first daily close below 157.00 since 18 September. On the chart, the six-month trading range stretches between the 8 September low just below 153.00 and July's high just below 164.00.

Daily chart for USD/JPY