Investors eye major Fed policy meeting
The dollar held its recent gains in early Asian trading on Wednesday, as investors awaited the outcome of a critical Federal Reserve policy meeting to see if it would confirm growing market expectations for earlier rate hikes next year.
The dollar index compares the US currency to six major currencies. This week it was at 96.557, up 0.5 percent in choppy trading. It is approaching last week’s high of 96.954, which would be a two-week high.
The dollar’s gains have been widespread. Traders were keeping an eye on the Federal Open Market Committee in the United States for two reasons. First, whether they accelerated the tapering of their bond-buying program, and second, whether policymakers accelerated their projections for interest rate increases in their so-called dot plot. Markets expect the Fed to end its bond-buying program in March and raise interest rates one or two times in 2022.
The euro last traded at $1.1265, not far from its all-time low of $1.1184 in November. The pound has been stuck at $1.13326 as Britain deals with an increase in the new coronavirus’s Omicron variant cases.
Markets currently anticipate that the Fed will announce a reduction in asset purchases of $25 billion to $30 billion per month, down from $15 billion currently.
A figure at the lower end of that range, according to Mundy, could cause some short-term dollar weakness.
The yen fell slightly to 113.78 per dollar, continuing its downward trend.
The Australian dollar wassteady at 0.7107 per dollar. In contrast, the Canadian dollar was weaker at 1.2854 per dollar, weighed down by falling oil prices. Given that China is Australia’s largest trading partner, Australian currency investors kept a close eye on Chinese economic activity data due later in the day. Bitcoin was doing little at $48,500.
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