As traders awaited interest rate announcements this week from the Federal Reserve, Bank of England, and Bank of Japan, the U.S. dollar fell versus a basket of currencies on Monday but held close to a six-month high in quiet trading. “The abundance of event risk and central bank meetings coming up is keeping a lid …
As traders awaited interest rate announcements this week from the Federal Reserve, Bank of England, and Bank of Japan, the U.S. dollar fell versus a basket of currencies on Monday but held close to a six-month high in quiet trading. “The abundance of event risk and central bank meetings coming up is keeping a lid on volatility,” said Michael Brown, market analyst at Trader X. “Traders really don’t want to chase moves or take on significant risk before the FOMC, BoE, BoJ, etc.” The U.S. dollar index, which compares the value of the dollar to six important rival currencies, was down 0.1% at 105.15, not far from the six-month high of 105.43 reached on Thursday. Last week marked the index’s ninth consecutive week of gains, its best winning streak in almost a decade.
According to U.S. Treasury Secretary Janet Yellen, there are no indications that the American economy is about to undergo a downturn. In recent weeks, resilient U.S. growth has supported a dollar recovery, but the gain will likely be put to the test by a barrage of data and Wednesday’s Fed interest rate decision. According to data released on Monday, homebuilder confidence in the United States decreased for a second month in September, with optimism reaching its lowest level since April as rising interest rates made homes less affordable for potential purchasers. Brown stated that the Fed should continue its current tightening bias and keep interest rates on hold. “I personally don’t anticipate too much of a significant shift in terms of the statement,” Brown added. “The balance of risks does tilt a little to the dovish side in terms of the dots, given recent rhetoric, though this shouldn’t significantly dent the dollar’s longer-run bullish trend given the FX market’s apparent focus on relative growth dynamics, where the U.S. remains by far the best of a bad G10 bunch,” he said, making reference to the Fed’s interest rate forecasts that will be released along with the statement.
According to Fed fund futures, market participants anticipate that the Federal Reserve will hold interest rates in the range of 5.25% to 5.5% on Wednesday.
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