Yen steady after bounce, investors await Fed

The Japanese yen held steady against the U.S. dollar Wednesday after posting impressive gains in the previous session, with investors cautious ahead of a policy statement from the U.S. Federal Reserve later in the day.

The dollar was at 95.93 yen, compared with 95.92 yen late in New York on Tuesday when it fell more than 1 percent. The U.S. dollar was steady on the euro at $1.4147, compared to $1.4149 late in New York.

The Fed concludes a two-day policy meeting later on Wednesday and investors will look for its assessment of the economy and whether it unwinds some of the quantitative easing policies currently in place.

There is mounting speculation it might grow more optimistic about a recovery after a better-than-expected jobs report for July. There is talk it may start putting in place strategies to withdraw some of the extraordinary stimulus with investors looking for the first interest rate hike in March.

But any downside surprise, like the Bank of England sprung last week, could negatively impact the greenback.

"The market has been running way ahead of itself pricing in the first tightening in this cycle," Alan Ruskin, international strategist at RBS Securities wrote in a note.

"The Fed will surely signal some obvious improvements in the state of the economy; but reaffirm that rates will remain low for an extended period. It will also likely confirm no changes to the size and duration of its asset program and this could prove to be a small negative for the dollar as a first reaction."

The euro inched up against the yen to 135.76 yen from around 135.72 yen late on Tuesday, when it struck a one-week low of 135.19 yen.

The Aussie also climbed against the yen to 79.71 yen, having fallen to 79.27 yen on Tuesday when investors unwound long Aussie positions after a slew of Chinese data failed to surprise on the upside.

The yen was a major beneficiary on Tuesday after stock markets succumbed to profit-taking on their extended rally, a move that hurt leveraged trades and benefited sovereign bonds. Wall Street stocks .SPX were lower, with U.S. financial shares hit by earnings warnings from a prominent banking analyst . link.....