Dollar Holds Firm Ahead of Fed Decision Amid Hike Expectations

The US dollar held onto recent gains on Wednesday, trading near multi-week highs against several major peers ahead of a Federal Reserve decision that traders expect will bring the first of several possible U.S. interest rate hikes.

The dollar has advanced alongside yields this week, with notable runs against the yen and New Zealand dollar. The yen touched a one-week low of 155.43 per dollar in the Asia session, while the New Zealand dollar hit a two-month low of $0.5737.

A 25-basis-point increase is about 90% priced in, implying the dollar will receive a modest boost if the Fed increases, according to Carol Kong, currency strategist at the Commonwealth Bank of Australia.

However, there's a small chance the dollar eases if the Fed hikes but Chair Kevin Warsh plays down the risk of follow-up hikes in the press conference. In the event the Fed doesn't increase the funds rate, a steep 1%+ fall in the dollar is expected.