Dollar Holds Firm Ahead of Fed Decision Amid Middle East Tensions
The US dollar is holding steady near a one-month high on Wednesday due to safe-haven flows after hostilities flared up in the Middle East. Investors are keeping a close eye on the Federal Reserve's interest rate decision later today, with markets pricing in a 33% chance of a 25-basis-point hike.
The dollar is firm at 101.43 against its peers and rose slightly against the yen to 163.88, putting pressure on the weakened Japanese currency, which continues to struggle at 40-year lows.
Fabien Yip, a market analyst at IG, expects the Fed to keep interest rates on hold due to ongoing inflation concerns. He believes that 'the U.S. dollar will be relatively strong because of the ongoing uncertainties in the Middle East,' but notes that the US is in a better position to maintain a hawkish stance compared to other central banks.
Hirofumi Suzuki, chief FX strategist at SMBC, thinks there's a possibility that the FOMC's policy decision and Chair's press conference could trigger further dollar strengthening, pushing USD/JPY to 164. He also mentions the likelihood of FX intervention appearing significant due to Japanese financial authorities' warnings.