TOKYO The dollar was steady near an all-time high of two decades against major peers on Tuesday , as investors awaited another sharp rate increase from the Federal Reserve as it battles to curb the overheated inflation.
The dollar index is a measure of the greenback’s performance against six rival currencies and is currently a little 0.09 percent higher to 109.64 and remained steady at the moment, after retreating from the high of 110.79 in the beginning of the month the last time for a while since the beginning of June.
As a further source of support In addition, it was reported that the 2-year U.S. Treasury yield, that is highly sensitive to expectations for policy increased to 3.970 percent overnight, the first time in a while since Nov. 2007. The yield on the 10-year Treasury hit an all-time high of 3.518 percent, which is a record that has not been seen since April.
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Investors have priced in a 75 basis point increase by the Federal Open Market Committee (FOMC) on Wednesday. They put 19% of the odds on an extraordinary 100% increase in percentage points.
While they remain high, the bets are down from 38percent on Wednesday after which they were shattered due to a surprising increase of U.S. consumer prices for August.
The dollar climbed 0.07 percent to 143.29 dollars, continuing the week-long trend of consolidation after two attempts to hit 145 earlier in the month of September that saw it go up to 144.99 on September. 7. It was the highest level in years. The currency pair of the dollar and yen tends to follow the spread of long-term yields that exists between U.S. and Japanese government bonds.
The Bank of Japan decides policy on Thursday. It is widely believed to keep its ultra-easy stimulative adjustments unchanged, including keeping the 10-year yield close to zero to help support the fragile recovery of the economy.
This is despite data released on Tuesday that showed consumer inflation slowed to an eight-year record high of 2.8 In August, the rate was 2.8 percent which was higher than the central bank’s goal of 2% for the fifth consecutive month.
“CPI was very strong, but the BOJ will likely keep policy unchanged, so expectations about Fed policy are more important” for markets in the currency market, said Tohru Sasaki. Sasaki is a strategy expert for J.P. Morgan in Tokyo.
“Dollar-yen will eventually break above 145, but the speed depends on how hawkish the Fed is, and developments in interest rate differentials.”
The euro was barely changed at $1.00235 after moving slowly up over the last week, and gaining ground above parity. The euro fell down to $0.9864 on September. 6, for the first time since the past two decades.
Sterling was somewhat lower at $1.14245 after finding its feet after a plunge to a record low in the region of $1.13510 at the close of the week.
The Bank of England will decide the policy on Thursday. investors are divided on whether a 75 or 50 basis point hike is in the table.
“With expectations split, the prospect of GBP volatility is unsurprisingly elevated,” Chris Weston who is the head of market research at Pepperstone in a note to clients.
“Given the heavy trend lower in the GBP, one can easily assume that the speculative part of the market is already heavily short GBP. This should cushion the downside on a 50bp hike but see a pronounced move higher should we see a 75bp hike.”
Related: The dollar stays strong as the Fed leads a big week for central banks
In addition, the minutes from the meeting of the Reserve Bank of Australian last month revealed that policymakers believe there is the need to reduce the pace of inflation as rates climbed to higher levels that are more normal.
The Australian dollar fell 0.11 percent to $0.67195. Its Antipodean rival that is that of the New Zealand dollar, fell 0.24 percent to $0.59425.
The most popular crypto Bitcoin declined 0.59 percent to $19,422, following a swing between a low of $18,540 and a three 1/2-week high of $22,781 in the last two weeks.
