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The Japanese yen weakened against other major currencies in the Asian session on Wednesday amid increased risk-on by the investors, as traders react to China's central bank saying it would cut its key policy rate by 10 basis points and lower the reserve requirement ratio by 50 basis points to boost growth. There is also confirmation that U.S. and Chinese officials are set to start formal trade talks this week.
However, ongoing trade uncertainty continued to weigh on the markets.
The People's Bank of China cut the seven-day reverse repurchase rate to 1.4 percent from 1.5 percent and also trimmed the reserve requirement ratio by half a percentage point, hours after it emerged that senior U.S. and Chinese officials will hold their first trade talks in Switzerland this weekend to ease tensions.
All eyes now turn to the Fed's monetary policy announcement later in the day as calls for rate cuts grow.
The U.S. central bank is expected to keep interest rates unchanged, with markets currently expecting a rate cut in July as tariffs begin to weigh on employment.
CME Group's FedWatch Tool is currently indicating a 96.8 percent chance the Fed will leave interest rates unchanged, but traders will look to the accompanying statement for clues about the outlook for rates.
In economic news, the final au Jibun Bank Japan Services purchasing managers' index (PMI) increased to 52.4 in April. Additionally, the number exceeded the flash reading of 52.2.
The composite PMI, which combines the manufacturing and service sectors, surfaced above the 50-line for the first time in two months in April, rising from 48.9 in March to 51.2 in April thanks to the recovery in service activities.
In the Asian trading today, he yen slipped to 162.63 against the euro, 191.23 against the pound and 173.65 against the Swiss franc, from yesterday's closing quotes of 162.27, 191.06 and 173.24, respectively. If the yen extends its downtrend, it is likely to find support around 166.00 against the euro, 198.00 against the pound and 177.00 against the franc.
Against the U.S., the Australia, the New Zealand and the Canadian dollars, the yen dropped to 143.33, 93.08, 83.16 and 104.01 from Tuesday's closing quotes of 143.09, 93.06, 86.03 and 103.91, respectively. The next possible downside target for the yen is seen around 152.00 against the greenback, 97.00 against the aussie, 88.00 against the kiwi and 106.00 against the loonie.
Looking ahead, Eurozone retail sales data for March is due to be released in the European session at 5:00 am ET.
In the New York session, U.S. MBA mortgage approvals data and U.S. EIA crude oil data are slated for release .
At 2:00 pm ET, the U.S. Federal Open Market Committee (FOMC) announces its monetary policy. The U.S. central bank is expected to keep federal funds rate unchanged at 4.25%-4.50%.
Half-an-hour later, The U.S. Federal Reserve chair Jerome Powell will conduct a news conference about the monetary policy decision.
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