Markets Brace as Fed Prepares First Rate Hike in Three Years

The Federal Open Market Committee (FOMC) is widely expected to raise the federal funds rate by 25 basis points on Wednesday, marking the first hike in three years, following stronger-than-expected inflation data in August, according to Commerzbank via FX Street.

Ahead of the announcement at 18:00 GMT, FX Street reports the US Dollar remains firm, supported by robust US Treasury yields with the 10-year yield at 5.00% and the 2-year at 4.66%. The Canadian Dollar has weakened against the US Dollar, while the Euro trades around 1.1535 and the Australian Dollar holds steady near 0.7130. Gold has rebounded slightly but remains cautious below $4,350 as traders reduce exposure ahead of the Fed decision.

For Japanese investors, the Fed's move could influence capital flows and currency volatility, impacting FX and equity markets as the Bank of Japan continues its own cautious policy stance amidst global tightening.