Dollar Up, Posts Small Gains Ahead of Fed Meeting
The dollar was up on Tuesday morning in Asia, holding onto small gains ahead of a week of central bank meetings, headlined by the U.S. Federal Reserve’s two-day gathering that starts later in the day.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.05% to 91.882 by 10:15 PM ET (2:15 AM GMT).
The USD/JPY pair inched up 0.06% to 109.19, with the dollar little changed at 109.170 yen early in the Asian session, after hitting the 109.365-mark overnight. The Bank of Japan (BOJ) will begin its own two-day policy meeting along with an extensive policy review, on Thursday.
The AUD/USD pair inched down 0.10% to 0.7747 and the NZD/USD pair inched down 0.03% to 0.7198.
The USD/CNY pair inched up 0.05% to 6.5028 and the GBP/USD pair edged down 0.12% to 1.3876.
The dollar’s gains come amid a retreat in U.S. benchmark yields from their highest levels in more than a year ahead of the Fed meeting. The benchmark ten-year Treasury yield was last at 1.6073%, after climbing to 1.6420% at the end of the previous week.
The Fed is widely expected to make few changes to its current monetary policy. However, investor concerns about runaway inflation continue to grow, fueled by the global COVID-19 vaccine rollout, a $1.9 trillion stimulus package in the U.S., and optimism for a faster-than-expected global recovery from COVID-19.
A particular focus for investors will be on any Fed comments addressing the run-up in yields. Of particular interest would be whether the movement in yields will prompt central banks to normalize policy quicker than they have so far signaled.
“Markets (are) essentially marking time ahead of the FOMC meeting,” which is “keeping investors a little bit cautious … there is a lot of focus on whether the new forecasts and dots plot will vindicate the current lift in Fed hike expectations,” National Australia Bank (OTC:NABZY) foreign-exchange strategist Rodrigo Catril said in a note.
Other central banks due to hand down their policy decisions as the week progresses are the Bank of England, whose decision comes on Thursday, followed by BOJ.
The euro remained largely unchanged and remained below the $1.20 mark since Mar. 5 as Europe’s COVID-19 vaccine rollout runs into some snags. Germany and France are among the European countries that have suspended the AstraZeneca PLC (LON:AZN)/University of Oxford shot over concerns about potential side effects.
Bitcoin continued to slide downwards from the record $61,781.83 high reached on Saturday, hovering around $54,782 on Tuesday.