Dollar drops ahead of Fed meeting

by Jonathan Adams

The dollar index fell 0.1% on the day to 95.650, but rose 0.5% for the week

The dollar fell along with U.S. Treasury yields on Friday as investors awaited next week’s Federal Reserve meeting, which will give a clearer outlook for rate hikes.

Yields and the dollar rose earlier this week on expectations that the Federal Reserve would tighten monetary policy sooner than previously expected, with the U.S. dollar index posting its biggest weekly gain since mid-December.

Stock market declines reflected weaker risk appetite, pushing US Treasury yields lower, while concerns about a possible conflict in Ukraine boosted demand for safe-haven bonds.

Markets are expecting up to four interest rate hikes this year, starting in March, and expect the Fed to begin reducing its balance sheet by more than $8 trillion within months. Next week’s Fed meeting could provide insight into how quickly rates will rise.

“Everything is going to be somewhat calm” until the Federal Reserve releases its statement on Wednesday after the two-day meeting, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

It makes sense the dollar is somewhat muted today given the lack of real impetus from the data front, Rai added.

The dollar index, which measures the dollar’s exchange rate against major currencies, fell 0.1% on the day to 95.650, but rose 0.5% for the week.

Among virtual currencies, Bitcoin also fell, hitting its lowest price since August. It has recently fallen 6%, while Ether is down more than 8%.

Against the yen, the dollar last fell 0.4% to 113.680 yen. For the week, the dollar fell by about 0.5% against the yen. The euro last appreciated 0.3% against the dollar to $1.1341, but has fallen about 0.6% this week.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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