Dollar Edges Higher as Markets Look Ahead to Fed
The dollar edged higher against a currency basket on Monday as markets awaited an upcoming Federal Reserve meeting where it is likely to hike interest rates and offer clues on the pace of monetary tightening for the remainder of this year.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, edged up to 89.91 by 04:27 AM ET (08:27 AM GMT).
With the Fed widely expected to raise rates by a quarter point on Wednesday investors are focused on whether policymakers will forecast four rate hikes this year, rather than the three hikes they forecast in December.
An upbeat assessment of the economy by newly installed Fed Chairman Jerome Powell late last month fueled speculation that a fourth rate hike could be on the cards.
Investors remained cautious amid fears that protectionist trade policies could act as a headwind to U.S. and global growth.
Trade was at the top of the agenda as the G20 group of finance ministers prepared to hold two days of meeting Buenos Aires, starting later on Monday.
The safe haven yen edged higher, with USD/JPY dipping 0.12% to 105.87.
Risk appetite was also hit after Japan’s Prime Minister Shinzo Abe took responsibility for a loss of confidence in the government over a growing scandal than has seen his popularity plunge, but denied that he or his wife was involved in cronyism in a land deal with a school operator.
The scandal raised concerns over Abe’s ability to continue pursuing his Abenomics policies, which include aggressive monetary easing.
The euro was a touch lower against the dollar, with EUR/USD slipping 0.14% to 1.2273.
The pound was also slightly lower, with GBP/USD easing 0.1% to 1.3927.