The U.S. dollar edged higher Monday, but it was still near the 20-year mark at the beginning of a week marked by a series of central bank gatherings, which includes a key Federal Reserve gathering.
The Dollar Index, that tracks the greenback’s performance against six other currencies, moved 0.3 percent higher at 109.793 which is not too far from the record-setting two-decade high of 110.79 that was reached on September. 7 for the first time since mid-2002.
The focus during this time will focus the U.S. Federal Reserve which is scheduled to begin the second day of its two-day policy-setting conference on Tuesday.
Related: The weak dollar and supply worries cause oil prices to go up.
The higher-than-expected U.S. consumer prices for August have strengthened the expectation of another significant rate hike at the end of the conference on Wednesday. A 75-basis point rate hike is generally expected, but some investors are anticipating the possibility of a complete percentage point hike and this is the possibility that has the dollar strong.
“We expect a third consecutive 75bp hike,” stated analysts at ING in the note. “High inflation is a possibility, however, inflation expectations and plans for corporate prices appear less likely to be a threat and the outlook for growth is uncertain, so we don’t expect the need for it. However, a more aggressive message on sticky inflation would have the Fed dots more closely reflect the market prices of an 4.25-4.5 percent terminal rate.”
The Fed isn’t the only central bank that will be meeting this week. Policymakers from the U.K., Switzerland, Norway and Japan will also gather in the coming week, as the global battle against inflation heats up.
USD/JPY increased by 0.3 percent to 143.28 in a calm trading with Japan during the holidays and in the lead-up to the Bank of Japan meeting. It is expected that the Japanese central bank appears likely to continue its monetary policy that is extremely loose that has put a huge burden on the past year.
The central bank could say something regarding the weakening yen with speculation about Japanese authorities are near to intervening on the foreign exchange market to boost the currency’s weakening that hit a 24 year record low in relation to the US dollar early in the month.
In addition there are The Bank of England as well as Norges Bank, the Swiss National Bank and the Norges Bank are all predicted to raise rates of interest even as the growth in Europe slows significantly.
The World Bank warned last week that the global economy has been slowing dramatically even an “moderate hit to the global economy over the next year could tip it into recession.”
Related: Dollar to PKR – Pakistani Rupee exchange rate on September 19, 2022
EUR/USD decreased 0.5 percent up to 0.9970, GBP/USD decreased 0.2 percent down to 1.1385 while the risk sensitive USD/AUD fell 0.5 percent to 0.6684.
USD/CNY rose 0.4% to 7.0103, with the pair climbing to an over two-year high, remaining above the psychologically-important 7 level after the People’s Bank of China cut a repo rate on Monday, attempting to support an economy that was severely dented by COVID-related lockdowns.
