By Hannah Lang and Amanda Cooper
WASHINGTON/LONDON (Reuters) – The dollar edged up but hovered around five-week lows on Wednesday, before the conclusion of the Federal Reserve’s policy meeting at which investors will be looking for any insight into what might happen with interest rates given the turmoil in the banking sector.
Markets show a quarter-point rise in U.S. rates is the most likely outcome, but investors will be keen to hear what Chair Jerome Powell says about the crisis that has rattled global banks this month and how carefully the central bank feels it needs to tread.
“The bank run has abated for the moment, but that might be contingent on what the Fed signals today,” said Adam Button, chief currency analyst at ForexLive in Toronto. “The risk is that the (Federal Open Market Committee) shatters the fragile calm in markets today… by acting too aggressively.”
The Fed, together with other major central banks, has made provisions to grease the wheels of the financial system, after the failure of several smaller U.S. lenders and the implosion of Credit Suisse at the weekend unleashed huge market volatility and a rout in banking stocks and bonds in particular.
Following Credit Suisse’s shotgun takeover by UBS, and U.S. authorities and large banks helping prop up some of the more vulnerable regional institutions, investors are breathing a little more easily, leading to the dollar losing some of its safe-haven appeal this week.
The Fed meeting concludes on Wednesday with the 2 p.m. EDT (1800 GMT) release of a policy statement followed half an hour later by a news conference by Powell.
“Today’s rate hike is priced in and expected and there would be no reason to not do it,” Fiona Cincotta, a strategist with City Index, said.
The dollar index rose 0.029% at 103.180, with the euro up 0.1% to $1.0778.
Christopher Wong, currency strategist at OCBC, said the focus will be on how the Fed communicates its forward guidance, in particular “the higher for longer” rhetoric.
“Ideally, we would like the Fed to go with a 25 basis point hike this meeting, tone down hawkish guidance and emphasize that policy decisions at subsequent meetings will continue to be data-dependent,” Wong said.
The pound was last up 0.08% versus the dollar to trade at $1.2224 after data showed UK inflation came in much hotter than expected in February, which puts Bank of England policymakers in a tough position when they meet on Thursday.
Markets show traders now fully expect a rate rise of 25 basis points, whereas just 24 hours ago, the chances of the bank raising by a quarter of a point or standing pat were 50/50.
The Japanese yen weakened 0.20% to 132.80 per dollar, while the Australian dollar rose 0.07% to $0.667.
In cryptocurrencies, bitcoin was last up 0.86% at $28,394.00, but below Monday’s nine-month peak.
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Currency bid prices at 10:08AM (1408 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 103.1700 103.1700 +0.02% -0.309% +103.2600 +102.9700
Euro/Dollar $1.0782 $1.0770 +0.12% +0.63% +$1.0800 +$1.0759
Dollar/Yen 132.7800 132.4550 +0.25% +1.28% +132.9900 +132.2600
Euro/Yen 143.14 142.67 +0.33% +2.02% +143.6200 +142.3900
Dollar/Swiss 0.9240 0.9223 +0.21% -0.04% +0.9245 +0.9207
Sterling/Dollar $1.2227 $1.2219 +0.07% +1.10% +$1.2297 +$1.2209
Dollar/Canadian 1.3713 1.3713 +0.02% +1.23% +1.3719 +1.3694
Aussie/Dollar $0.6675 $0.6671 +0.07% -2.08% +$0.6702 +$0.6662
Euro/Swiss 0.9962 0.9929 +0.33% +0.68% +0.9964 +0.9927
Euro/Sterling 0.8816 0.8812 +0.05% -0.32% +0.8820 +0.8773
NZ $0.6208 $0.6194 +0.19% -2.27% +$0.6224 +$0.6173
Dollar/Dollar
Dollar/Norway 10.5160 10.5570 -0.31% +7.23% +10.5570 +10.5010
Euro/Norway 11.3398 11.3540 -0.13% +8.06% +11.3760 +11.3176
Dollar/Sweden 10.3567 10.3338 +0.33% -0.49% +10.3692 +10.2991
Euro/Sweden 11.1668 11.1296 +0.33% +0.15% +11.1749 +11.1124
(Reporting by Hannah Lang in Washington and Amanda Cooper in London; Additional reporting by Lucy Raitano in London and Ankur Banerjee in Singapore; Editing by Emelia Sithole-Matarise and Raissa Kasolowsky)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.