The action in the dollar/yen pair was definitely the story of the week.
Starting off with additional yen strength, Japan finally pulled the trigger on currency intervention after a 6-year respite and defended the level around 83.00 admirably. Since then though, there has been very little in the way of price action for this pair as there are great risks present on either side and traders are hesitant to potentially step in front of a locomotive. The BoJ may not be done yet and could easily drop another $20 billion or so on the market to try and get the dollar back up toward the more desirable 90.00 level. On the other hand speculators seem to feel that the US Federal Reserve could also reengage the printing presses which would likely negate even the boldest move by the Japanese. In my opinion though, I think the probability of another action by Japan is much greater than any move from the Fed. Following a summer full of negative US data, the FOMC chose only to keep their balance sheet the same size and not allow it to shrink.
With the data in the US still not good, but much better so far in September than what we saw June through August, I don’t see any readily apparent reason why they should loosen up now when they didn’t last month. As far as timing of any moves, I would not really expect anything out of Japan before the FOMC announcement on Tuesday. Why would they risk another move that could potentially just get wiped out hours later by a move from the Fed Instead, if the US makes no move, and the BoJ wants to get back in, perhaps Wednesday is the day for that. Or perhaps, just the speculation of that will have investors doing the BoJ a favor and moving it for them.