Early on Tuesday in European trading, the U.S. dollar fell as investors assessed the possibility that the Federal Reserve would announce a less aggressive course for raising interest rates on Wednesday at the conclusion of its most recent policy meeting.
The Dollar Index, which measures the value of the dollar against a basket of six other currencies, was trading 0.4% lower at 110.993 at 03:55 ET (07:55 GMT), falling from a two-decade high of 114.78 at the end of September.
Related: Rates for the dollar, the euro, and the pound in Pakistan on October 28, 2022.
Following the conclusion of its most recent policy-setting meeting on Wednesday, the Fed is generally anticipated to announce a further 75 basis-point rate hike, marking its fourth consecutive increase.
The magnitude of the rate increase in December, however, is up for question as predictions rise that indications of economic deterioration would persuade the Fed’s officials to accept a lesser rate increase, most likely of 50 basis points.
The Reserve Bank of Australia increased interest rates by just 25 basis points earlier Tuesday, despite raising its inflation forecast and lowering its GDP outlook, while the Bank of Canada unexpectedly slowed the pace of rate increases last week, raising its benchmark overnight lending rate by 50 basis points as opposed to the three-quarter move anticipated.
After recent data revealed that Australian inflation increased by a higher than projected 7.3% to a 32-year high in the third quarter, there were concerns the central bank was becoming slack on inflation. This led to a 0.3% increase in the AUD/USD currency pair, reducing earlier significant gains.
After last week’s 75 basis point increase, there is still pressure on the European Central Bank to raise interest rates further. This is because data released on Monday revealed that Eurozone inflation reached a record-high 10.7% in October.
However, “we believe the Eurozone and the euro will continue to struggle as stricter interest rates and a faltering Chinese economy put pressure on global growth. This is why last Thursday’s EUR/USD high of 1.0089 may have been important, according to experts at ING.
“Our preferred view of EUR/USD retesting the lows near 0.95 would support a closure back under the 0.9900/9910 level this week.”
Ahead of the Bank of England meeting on Thursday, which is largely anticipated to result in another increase in interest rates with inflation running at double digits, GBP/USD increased 0.3% to 1.1507.
After Japanese authorities disclosed that their nation spent a record $42.8 billion on currency intervention this month to support the yen, USD/JPY dropped 0.5% to 147.97.
Related: Rates for the dollar, the euro, and the pound in Pakistan on October 27, 2022.
Shunichi Suzuki, the finance minister, reiterated on Tuesday that the government is constantly monitoring market activity and will not put up with “excessive currency fluctuations driven by speculative trading.”
Despite the central bank setting the official guiding rate over 7.2 for the first time since the global financial crisis of 2008, USD/CNY declined 0.2% to 7.2889, retreating from a nearly 15-year peak.