Dollar Strengthens Ahead of Key Central Bank Decisions
The dollar has strengthened ahead of key interest rate decisions from major central banks. The US Federal Reserve is set to announce its policy decision on Wednesday, while the Bank of Japan will make its move on Friday.
Market expectations are skewed in favor of a Fed rate hike, with investors pricing in an 86% chance of an increase this week and another move higher later in the year. The European Central Bank raised rates last week, warning of further hikes to come.
The yen's recent rally has stalled near a seven-month high as traders ponder the potential for rate hikes from both the Fed and BOJ. Signs are emerging that speculators are turning bullish on the yen, but analysts at MUFG note that a 25 bps hike is already almost fully priced in.