The dollar traded near a one-week high on Tuesday versus a basket of major rivals, supported by hopes of a hawkish Federal Reserve meeting this week and continued demand amid uncertainty about the Omicron coronavirus pandemic.
The dollar index, which measures the currency against six peers, was little changed at 96.416, after touching 96.450 on Monday for the first time since December 7.
The Fed’s two-day meeting, which begins later on Tuesday, headlines a string of central banks announcing policy decisions this week, including the European Central Bank and the Bank of England on Thursday and the Bank of Japan on Friday.
The US central bank is expected to announce that it will end its bond purchase incentives sooner than previously, potentially setting off earlier interest rate hikes next year.
The money market currently has a good chance of a rate hike until June, while another will take place in early November.
“This leaves a very high bar for the Fed to deliver a ‘hawkish surprise’,” Westpac strategists wrote in a client note.
“But even if the Fed only matches high expectations, they are still the roads ahead of the ECB, which is looking for ways to maintain housing” after the Pandemic Emergency Purchase Program (PEPP) ended in March.
Strategists said that although the dollar index’s progress has slowed recently, a pullback to the mid-95 level is a buy.
A Reuters poll of ECB watchers found that the ECB will halve the amount of assets purchased every month from April.
The euro was flat at around $1.12835 after touching a one-week low of $1.12605 overnight.
Sterling was little changed at $1.3210, having touched a one-year low of $1.31615 last week.
Britain reported the first publicly confirmed death globally from Omicron, Britain’s Prime Minister Boris Johnson said on Monday, a day after warning of a “tidal wave” of infections from the new version.
British scientists announced findings that two doses of current COVID-19 vaccines do not induce sufficient neutralizing antibodies against Omicron.
Meanwhile, mainland China detected its first case of Omicron infection, state media said on Monday.
The dollar changed hands at 113.545 yen, another safe haven, consolidating in the upper end of the pair’s trading range this month.
The risk-sensitive Australian dollar fell 0.2% to $0.71215, returning to Monday’s one-week low of $0.7111.
Leading cryptocurrency bitcoin rose nearly 1% to $47,211, lifting Monday’s low of $45,750, a level not seen since December 4, when the digital coin fell below $42,000 for the first time since September.
The dollar traded near a one-week high versus a basket of major rivals on Tuesday, supported by expectations of a hawkish Federal Reserve meeting this week…Read more: https://t.co/B20h6tgf2p
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