FOREX US dollar sails higher as markets price in a sharp Fed rate hike – Reuters | Jewelry Dukan

US one dollar banknotes are seen in front of the displayed stock chart in this illustration dated February 8, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

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  • Markets in consolidation mode ahead of Fed policy decision
  • Fed fund futures are pricing in a 19 percent chance of a 100 basis point hike
  • China’s yuan hits a 26-month low against the dollar
  • The New Zealand dollar falls to its lowest level against the US dollar since May 2020

NEW YORK, Sept 19 (Reuters) – The dollar rose against major currencies on Monday, trading within tight ranges, ahead of a series of central bank meetings this week led by the Federal Reserve, which is likely to hike interest rates by another 75 basis points Points (bps).

Volume was light overall as markets in London and Tokyo were closed for public holidays.

However, global equity markets remained tight and the dollar maintained its firm tone amid expectations that the Fed would maintain its aggressive tightening path into next year to curb stubbornly high inflation.

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Fed fund futures have priced in an 81% chance of a 75 basis point rate hike this week and a 19% chance of a 100 basis point hike by the end of the Federal Reserve’s two-day meeting, according to Refinitiv data

The dollar index, which measures the currency against six counterparts, rose 0.1% to 109.62, not far from a 20-year high of 110.79 hit on September 7th.

Since the start of the year, the dollar index is up 14.7%, on course for its best annual percentage gain in 38 years.

“In general, the trend is your friend to the end of the curve. The dollar will follow that pretty well,” said Amo Sahota, executive director of San Francisco-based FX consultancy Klarity FX.

“Will there be more dollar strength ahead of the FOMC (Federal Open Market Committee)? I think the market will pull a little here. He’ll go into a hold and some consolidation,” he added.

Dollar remains strong as markets brace for another aggressive Fed rate hike

This week is also dotted with bank holidays which could thin liquidity and lead to more price action including Japan and the UK on Monday, Australia on Thursday and Japan again on Friday.

Elsewhere, the euro was little changed against the dollar at $1.0021, while the pound slid 0.1% to $1.1424 and was within sight of Friday’s 37-year low of $1.13510, during New Zealand fell 0.6% to $0.5958.

At the start of the session, the New Zealand unit fell to its lowest level since May 2020 of $0.5933

The Canadian dollar fell to its lowest level in almost two years at C$1.3354 per US dollar. The US dollar last changed hands at $1.3258, unchanged on the day.

Against the yen, the dollar rose 0.2% to $143.18, hovering below a strong 145 resistance level, bolstered by heightened talks by Japanese politicians over currency intervention.

The Bank of Japan is widely expected to stick to massive stimulus and maintain ultra-loose policy at Wednesday and Thursday meetings. But a turning point in Japanese monetary policy may come sooner than thought, as the central bank recently dropped the word “temporary” to describe elevated inflation. Continue reading

China’s yuan closed at a fresh 26-month low on Monday, trading below the psychologically critical 7 per dollar level. In offshore trade, the yuan was weaker 0.35.

Bitcoin, the largest cryptocurrency by market value, fell to a three-month low below $19,000 as concerns about rising interest rates weighed on risk assets around the world. Read More It was last down 0.2% to $19,381.

Ether, the cryptocurrency used on the Ethereum blockchain, rebounded from a two-month low against the dollar to end up 1.4% at $1,358.60.

Ethereum went through a major software upgrade last week that is changing the way Ether tokens are created and drastically reducing energy consumption. Continue reading

(This story corrected to show the dollar is on track to post its largest annual percentage gain in 38 years in 2022, not 18 in the 6th paragraph)

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Currency bid prices at 15:19 (1919 GMT)

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Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Dhara Ranasinghe in London and Kevin Buckland in Tokyo; Edited by Bradley Perrett, Frank Jack Daniel, Paul Simao and Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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