The US dollar eased against the yen on Wednesday as traders adjusted their positions ahead of a crucial Federal Reserve policy meeting expected to initiate the first interest rate cut in over four years. The market is currently pricing in a 63% chance of a 50 basis point cut, with the Fed’s decision due at 1800 GMT.

The dollar, which has weakened alongside falling US bond yields since July, was trading at $1.1124 per euro, nearing the year’s low of $1.1201. Investors are anticipating a more aggressive US easing cycle, with over 100 basis points of cuts priced in by the end of the year.

The yen has strengthened significantly, gaining more than 12% since July, as the Bank of Japan continues its rate-hiking cycle while the Fed prepares to cut. The yen recovered about 0.45% to 141.78 per dollar, reversing part of an overnight decline. Against the euro, the yen was down 0.33%, trading at 157.72.

Meanwhile, the Australian dollar hit a two-week high at $0.67885, while the New Zealand dollar found support at $0.6225, aided by a rise in milk prices. However, traders are cautious ahead of the Fed’s meeting, with the size of the rate cut and the Fed’s tone likely to influence market direction.

Currency strategist Francesco Pesole of ING noted, “Markets are struggling to find a clear direction today before the FOMC.” Traders are looking to the Fed’s guidance to drive the next moves in the foreign exchange market.