US Dollar Holds Near Two-Week High Ahead of Federal Reserve Decision
US Dollar remains near a two-week high as markets await the Federal Reserve’s interest-rate decision.
The US dollar remained near a two-week high on Wednesday as investors awaited interest-rate decisions from major central banks. The US Federal Reserve was widely expected to keep its policy rate unchanged, with traders focused on signals about a possible move in December.
Most major currencies traded within narrow ranges ahead of the announcement. The euro held steady at $1.1129, while the British pound remained at $1.3307. Against the Japanese yen, the dollar fluctuated before trading 0.1% lower at 157.81 yen.
New Zealand Dollar Slides After Rate Decision
The New Zealand dollar fell as much as 1.7% to $0.5585 after the Reserve Bank of New Zealand unexpectedly kept its interest rate at 2.75%.
A Reuters poll had found that 22 of 27 economists expected the central bank to raise rates.
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“The market just got that wrong,” said Mike Houlahan, director at Auckland-based Electus Financial Ltd. He also noted that New Zealand’s election was only 10 days away, adding that it was customary for the central bank to avoid political involvement.
Australian Inflation Keeps Rate Outlook in Focus
The Australian dollar gained 0.1% to $0.7035 following the release of inflation data. Consumer inflation rose 1.3% in the third quarter, compared with 0.6% in the previous quarter.
The trimmed mean measure of core inflation increased 1%, matching market expectations. The annualised rate remained above the central bank’s target at 3.6%.
Reserve Bank of Australia Governor Michele Bullock told lawmakers on Wednesday that policymakers would consider whether four interest-rate increases this year would be enough to bring inflation back to target. The bank is due to hold its next policy meeting next week.
Traders Await Federal Reserve Guidance
In the United States, markets largely expected the Federal Reserve to leave interest rates unchanged. Fed funds futures indicated a 91% probability of a rate hold, according to CME Group’s FedWatch tool.
However, investors were watching closely for any change in the Fed’s assessment of future policy.
“The Fed doesn’t need to hike today to move markets,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It simply needs to change the perceived probability of hiking in December.”
The US dollar index, which tracks the greenback against six major currencies, rose 0.3% on Tuesday to 102.40. That marked its highest level since October 14.
Meanwhile, the yield on the US 10-year Treasury note remained steady at 4.9967%.
Cryptocurrency Markets Remain Steady
Cryptocurrency prices showed limited movement as investors awaited the Fed’s decision. Bitcoin traded flat at $80,736.07, while ether edged up 0.1% to $2,345.25.
The currency and bond markets are likely to remain sensitive to central bank guidance, particularly any signals that could change expectations for interest rates in December.
