Dollar robust as Fed headlines big week for central banks By Reuters

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© Reuters. FILE PHOTO: U.S. one dollar bills are seen in front of a displayed stock chart in this illustration taken February 8, 2021. REUTERS/Dado Ruvic/Illustration/File photo

By Dhara Ranasinghe

LONDON (Reuters) – The dollar held firm near two-decade highs against other major currencies on Monday, biding its time ahead of a slew of central bank meetings that will include one from the U.S. Federal Reserve that is likely to deliver another sharp rate hike. .

Business was generally subdued, with markets in London and Tokyo closed for public holidays.

However, the dollar maintained its firm tone, due to expectations that the Fed will maintain its aggressive rate hike to contain uncomfortably high inflation.

The , which measures the currency against six equivalents, was 0.4% stronger at 110.06, returning to a 20-year high of 110.79 hit on September 7.

“A little while ago there was talk that the Fed was almost done with rates, but that was premature,” said Nordea’s chief analyst Jan von Gerich. “The Fed is not close to being done and that supports the dollar.”

As data last week showed a widening in underlying US consumer prices, markets entertained the possibility of a 100 bps rate when the Fed concludes its two-day meeting on Wednesday. Markets are fully pricing in a 75 basis point Fed rate hike this week and about a 20% chance of a 100 bps hike.

This week is also full of holidays that could thin liquidity and result in sharper price moves, with Japan and the UK off on Monday, Australia on Thursday and Japan again on Friday, among others.

The euro was 0.4% lower at $0.9972, sterling slipped 0.3% to $1.1390 ​​and kept Friday’s 37-year lows in sight, while the New Zealand and Australian dollars fell more than 0.5% each.

Markets are divided on whether the Bank of England will raise interest rates by 50 or 75 basis points on Thursday. Monetary stress could clash with new British finance minister Kwasi Kwarteng’s urgent mini-budget, which is expected on Friday and is likely to provide more details on support to help ease the country’s cost of living crisis.

Canada’s dollar fell to its lowest in nearly two years at 1.3311 per US dollar in early European trade.

The dollar was also 0.4% firmer at 143.46 yen, hovering below a strong resistance level at 145, which was boosted by tough talk from Japanese politicians about monetary intervention.

The BOJ is widely expected to stick with massive stimulus at its meeting on Wednesday and Thursday, maintaining its ultra-loose policy. But a turning point in Japanese monetary policy may come sooner than thought, with the central bank recently dropping the word “temporary” for its description of elevated inflation.

held to the weaker side of 7 per dollar as economic concerns and the possibility of more benchmark interest rates loomed on Tuesday. [CNY/]

the largest cryptocurrency by market value, fell to a three-month low below $19,000 as concern over rising interest rates globally hit risk assets.

Source

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