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Fed meeting could be a catalyst for dollar weakening

Schedule euro to dollar at intervals of 1 hour

The euro could gain against the dollar if the Federal Reserve dampens speculation about earlier cuts in asset purchases and interest rate hikes when it releases its monetary policy decision on Wednesday, Commerzbank reported.


“Our economists, as well as most market participants, expect the Fed to re-emphasize that the time has not yet come to end expansionary monetary policy and that it will tolerate higher inflation for some time,” the currency analyst said. Commerzbank Yu-na Park-Heger.


The Fed could disappoint some market participants with its resilience, she said, paving the way for EUR / USD to rise, at least in the short term. EUR / USD fell 0.05% to 1.2073 on Tuesday.

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The dollar rallies this morning against the top 10 currencies as investors cut risks ahead of the Federal Reserve’s decision on Wednesday, Bloomberg writes. The Bloomberg US dollar index rose for the first time in three days after falling to a two-month low on Monday. The New Zealand dollar was the worst G-10 currency.


“The market is really marking time awaiting the FOMC decision,” said Rodrigo Catril, senior currency strategist at National Australia Bank Ltd. in Sydney. “It’s too early for the Fed to change its policy – this week is all about holding back a tough stance, moving in the right direction, but it’s too early to talk about exit strategies.”


The Bloomberg Dollar Spot Index rose 0.1% and the yield on 10-year US bonds climbed one basis point to 1.58%.

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The fact that “BBDXY has been falling in the last seven of the eight FOMC meetings confirms my view that the hawk Fed rate has not paid off in recent months,” said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney.


USD / JPY rose 0.1% to hit 108.19, earlier hitting a weekly high of 108.39. Bank of Japan kept its discount rate at -0.1% on Tuesday; he raised the forecast for economic growth for the fiscal year to 4%, lowering the forecast for price increases to 0.1%.


“The rebound in USD / JPY from key support at 107.70 could be a canary in the coal mine, suggesting that recent dollar weakness has come to an end,” said NAB’s Katril.


The NZD / USD fell 0.3% to 0.7218.

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