Dollar Slightly Changed Against Rivals
The dollar climbed against a trade weighted basket of other major currencies on Tuesday, as market players keep a close eye on the Federal Reserve’s policy meeting, due to start later in the day.
USD/JPY was slightly changed at 118.27.
The Federal Reserve is expected to keep interest rate on hold at the conclusion of its two day policy meeting on Wednesday after hiking interest rates for the first time in almost a decade in December.
Market players were focusing on the Federal Reserve policy statement for further signs that the bank is planning to slow the path of interest rate hike this year after recent turmoil in global markets.
Economic conditions have changed significantly since the Federal Reserve elevated rates in December, with global stock markets and oil prices sharply lower in the since the historic rate hike.
As stated by a market economist, “Financial conditions have tightened by the equivalent of four rate hikes, so the Fed may hold off from further tightening for the near future. We can expect the Fed to perform a balancing act in the upcoming statement, acknowledging weaker economic conditions while emphasizing that the economy continues to grow.”
“The collapse of oil prices has contributed to the weak inflation picture, with current inflation levels well below the Fed target of 2.0%. Traders should be prepared for possible volatility following the upcoming policy statement,” the economist added.
Investors were also cautious ahead of the conclusion of the Bank of Japan’s meeting on Friday.
Most analysts are expecting no changes to monetary policy, but recent declines in economic reports and remarks by central bank officials have fuelled expectations for more easing this year.
The dollar was also above the pound with GBP/USD plunging 0.40 percent to 1.4191. The greenback also rose against the Swiss franc with USD/CHF surging 0.21 percent to 1.0150.
The Australian dollar inched up with AUD/USD climbing 0.12 percent at 0.6962, while NZD/USD hit 0.6425 during late Asian trade, which is the pair’s lowest level since January 21. The pair subsequently consolidated at 0.6442, sinking 0.19 percent.
EUR/USD slumped 0.09 percent to 1.0839, while in the economic news, there are no euro zone releases on the schedule.
At the European Central Bank policy meeting last week, the ECB did not reduce interest rates and held off from additional monetary easing. This time the euro did not react with sharp gains, unlike the December meeting when the lack of action by the central bank surprised the markets and EUR/USD racked up large gains.
During last week’s meeting European Central Bank President Mario Draghi reported that he reserved the right to review and reconsider the ECB’s monetary policy in March.
In December, the markets were banking on some robust monetary action for the European Central Bank. When this did not materialize, the result was a large volatility from the euro.
Meanwhile, the kiwi jumped higher against the Australian dollar with AUD/NZD plummeting 0.19 percent to 1.0755.
The United States dollar index that measures the greenback’s strength against a trade weighted basket of six other major currencies rallied 0.11 percent at 99.45, still near from last Thursday’s more than one month highs of 99,79.
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