Dollar Climbs as Fed Decision Looms Amid Middle East Tensions
The US dollar held near a one-month high on Wednesday as investors remained cautious ahead of the Federal Reserve's interest rate decision. The dollar was buoyed by safe-haven flows after renewed hostilities in the Middle East pushed oil prices higher and revived inflation concerns.
Currency movements were subdued in early Asian trade, with markets pricing in a 33% chance of a 25-basis-point US rate hike. The euro languished near a one-month low at $1.1386, while sterling was down 0.06% at $1.3282.
Fabien Yip, a market analyst at IG, expects the Fed to keep interest rates on hold later in the day, citing ongoing uncertainties in the Middle East and the potential for more inflation risk. The dollar's strength is likely to continue due to these uncertainties, with some predicting it could push USD/JPY to 164.
Japanese financial authorities have stepped up their warnings about possible intervention, which could further weaken the yen. Meanwhile, other currencies like the Australian and New Zealand dollars were little changed or fell slightly against the dollar.