U.S. dollar advances as markets brace for hefty Fed rate hike

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LONDON/NEW YORK — The dollar gained against major currencies on Monday, trading

within narrow ranges ahead of a slew of central bank meetings this week led by the Federal Reserve, which is

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likely to deliver another hefty interest rate hike.

Trade was generally subdued, with markets in London and Tokyo closed for public holidays.

World stock markets remained on edge and the dollar maintained its firm tone, given expectations that

the Fed would maintain its aggressive tightening path to contain uncomfortably high inflation.

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“On a high level, the greenback is benefiting from a continued sell-off in global equities,” said John

Doyle, vice president of trading and dealing at Monex USA in Washington.

“With the Fed’s decision pending, I think the dollar will continue to take its cues from overall risk

sentiment. We do not think the Fed will hike 100 basis points this week, but the potential is still real,”

he added.

Fed funds futures have priced in a 79% chance of a 75-basis-point rate hike this week and a 21%

probability of a 100-basis-point increase at the conclusion of the U.S. central bank’s two-day policy

meeting, according to Refinitiv data.

The dollar index, which measures the currency against six counterparts, was up 0.4% at 109.98,

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not far from 20-year high of 110.79 hit on Sept. 7.

This week is also smattered with holidays that could thin liquidity and result in sharper price moves,

with Japan and Britain off on Monday, Australia on Thursday, and Japan again on Friday, among others.

In other currencies, the euro was 0.3% lower against the dollar at $0.9984, sterling was 0.4%

weaker at $1.1386 and within sight of Friday’s 37-year lows, while the New Zealand and Australian

dollars fell 0.8% and 0.5%, respectively.

The New Zealand dollar fell to its lowest level since May 2020 of US$0.5933, and was last at US$0.5937

.

The Canadian dollar fell to its lowest level in almost two years at C$1.3324 per U.S. dollar.

“The drop in oil has allowed a modest rally against commodity-based currencies such as the Canadian

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dollar,” said Monex’s Doyle.

The dollar was around 0.4% firmer at 143.50 yen, hovering beneath a strong resistance level at

145 that has been reinforced by Japanese policymakers’ toughened talk of currency intervention.

The Bank of Japan is widely expected to stick with massive stimulus at its meeting on Wednesday and

Thursday, keeping its ultra-loose policy in place. But a turning point in Japanese monetary policy may come

sooner than has been thought, with the central bank recently dropping the word “temporary” for its

description of elevated inflation.

China’s yuan ended at a fresh 26-month low on Monday and traded below the psychologically critical

7-per-dollar level. In offshore trade, the yuan was 0.35 weaker.

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Bitcoin, the biggest cryptocurrency by market value, fell to a three-month low below $19,000,

as unease over rising interest rates globally knocked risk assets. It was last down 0.9% at

$19,241.

Ether, the cryptocurrency used in the Ethereum blockchain, rallied from a two-month low against the

dollar and was last up 1.8% on the day at $1,358.

Ethereum went through a major software upgrade last week that alters the way ether tokens are created,

drastically reducing its energy usage.

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Currency bid prices at 10:34AM (1434 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 109.8700 109.5500 +0.31% 14.851% +110.1800 +109.4800

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Euro/Dollar $0.9995 $1.0015 -0.20% -12.08% +$1.0029 +$0.9966

Dollar/Yen 143.4100 142.9400 +0.33% +24.57% +143.6400 +142.6500

Euro/Yen 143.35 143.13 +0.15% +10.00% +143.5400 +142.8100

Dollar/Swiss 0.9666 0.9644 +0.26% +6.01% +0.9695 +0.9630

Sterling/Dollar $1.1398 $1.1422 -0.21% -15.72% +$1.1441 +$1.1356

Dollar/Canadian 1.3289 1.3262 +0.23% +5.13% +1.3344 +1.3252

Aussie/Dollar $0.6693 $0.6722 -0.43% -7.92% +$0.6734 +$0.6673

Euro/Swiss 0.9660 0.9660 +0.00% -6.84% +0.9671 +0.9634

Euro/Sterling 0.8767 0.8768 -0.01% +4.38% +0.8787 +0.8748

NZ $0.5934 $0.5989 -0.90% -13.29% +$0.6002 +$0.5929

Dollar/Dollar

Dollar/Norway 10.2695 10.2040 +0.79% +16.74% +10.3320 +10.1900

Euro/Norway 10.2695 10.2059 +0.62% +2.55% +10.3125 +10.2062

Dollar/Sweden 10.8106 10.7337 +0.47% +19.88% +10.8348 +10.7251

Euro/Sweden 10.8069 10.7560 +0.47% +5.60% +10.8187 +10.7571

(Reporting by Dhara Ranasinghe in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by

Kevin Buckland in Tokyo; Editing by Bradley Perrett, Frank Jack Daniel and Paul Simao)