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Saturday, October 23, 2021
Trading

Dollar drops from month-high levels ahead of Fed meeting

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The Dollar Index traded 0.1% lower at 93.130, having jumped to a high of 93.455 for the first time since Aug. 23

The dollar slipped from a month high in early European trade Tuesday ahead of this week’s crucial Federal Reserve meeting, while the yuan remained under pressure over China Evergrande Group’s debt woes.

At 0755 GMT, the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 93.130, having jumped to a high of 93.455 for the first time since Aug. 23.

USD/JPY advanced 0.2% to 109.57, EUR/USD jumped 0.1% to 1.1736, GBP/USD gained 0.2% to 1.3680, while the risk sensitive AUD/USD added 0.4% to 0.7277, rebounding from a three-week low.

The Fed starts its two-day policy meeting later Tuesday, and trading ranges are likely to be limited ahead of Wednesday’s press conference amid expectations the central bank will provide more information about when it will start its asset tapering.

We think there will be a certain degree of acknowledgement that the current level of monetary accommodation may no longer be warranted and that asset purchases may start to be unwound by year-end, said analysts at ING, in a note.

Meanwhile, USD/CNY traded flat at 6.4662, after weakening as far as 6.4879 on Monday for the first time since Aug. 23 amid worries over whether important property giant China Evergrande Group will default on its upcoming due payments given fears of potential contagion. Turnover remains depressed by the extended public holiday in China, which ends on Wednesday.

Additionally, NZD/USD advanced 0.1% to 0.7028, with gains held back by Reserve Bank of New Zealand (RBNZ) assistant governor Christian Hawkesby hinting that the central bank would move in 25 basis point increments, instead of the widely expected 50 basis point hike.

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