Dollar Pauses Rally Ahead of Fed Rate Decision
The US dollar paused its multi-day rally on Wednesday after rising for seven sessions in a row. The greenback lingered near its highest levels in over a week, as foreign exchange desks took a defensive posture ahead of the Federal Reserve's interest rate decision.
The dollar index, which tracks the greenback against a basket of six major currencies, was virtually flat around 99.59. This came after investors aggressively priced in a resumption of monetary tightening in Washington.
Crossing major European bourses, the euro was also flat on the day, hovering close to its lowest levels in nearly one month at $1.1500. Currency traders continued to digest the fallout from the European Central Bank's decision last Thursday to raise its benchmark deposit facility rate by 25 basis points to 2.50% to counter energy-driven inflation.
The dollar slipped marginally against the Japanese currency, trading around 154.97 yen as markets positioned for the Bank of Japan's monetary policy gathering on Friday. The US central bank is expected to deliver a 25-basis-point interest rate increase, with analysts noting that 'when the Fed tightens, it normally raises rates at sequential meetings, which is our current expectation despite the proximity of the October policy meeting to the midterm elections.'