Dollar Firm with Focus on the Fed Meeting

The dollar held steady near its two-week highs against a basket of major currencies on Tuesday. Traders are also waiting for fresh catalysts from the US Federal Reserve’s policy meeting this week.

forex rates

The dollar index, which measures the greenback against a basket of six major international currencies, rose 0.1 percent to 93.931. This was not far from its highest since November 21, which was Friday’s peak of 94,087.

The dollar dropped 0.1 percent against the yen to 113.48 yen. This drop follows a rise to 113.69 yen on Monday, dollar’s strongest level in about a month.

The euro last traded at $1.1771, falling from Monday’s intraday high of $1.1811.

Traders greatly expect the Fed to raise interest rates during its two-day policy meeting which will end on Wednesday. It is also predicted that they will tighten policy further by 2018.

Economists expect three more rate hikes next year, even though the outlook remains unclear due to stubbornly subdued inflation.

“Once the initial flurry of short-term volatility rides out, we’re likely to see the U.S. dollar stronger again,” said strategist Steven Dooley. After Fed’s policy announcement, there’s a big possibility that the dollar could sag initially due to the rate hike priced in this week, he added.

Dooley stated further that the Fed will probably sound optimistic regarding the economic outlook. Adding that it will likely help underpin the greenback.

“It seems most likely that the U.S. Federal Reserve will continue to sound optimistic and certainly continue on the path to raise rates three times next year,” Dooley said.

Aussie and Kiwi Rises

The Australian and New Zealand dollars moved higher against the USD on Tuesday. This rise follows the revelation of disappointing Australian data.

AUD/USD rose 0.24 percent to 0.7545.

The Australian Bureau of Statistics said earlier on Tuesday that its house price index dropped 0.2 percent during the third quarter. This confused expectations of a 0.6 percent rise, after its increase in the three months leading to June which was at 1.9 percent.

NZD/USD recorded its highest trade since November 28 at 0.6936, gaining 0.36 percent.

The kiwi was supported by the appointment of former central bank official Adrian Orr as the head of the Reserve Bank of New Zealand starting March 2018.

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