Dollar pulls back from three-week high

Kalerkantho Online   

21 March, 2018 15:17 PM

Dollar pulls back from three-week high

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The dollar pulled back from three-week highs on Wednesday as traders took some profits ahead of the Federal Reserve’s first expected rate rise of 2018 and focused on whether the central bank will indicate three or four hikes for this year.

With the dollar down, the euro and yen were able to recover some losses made on Tuesday, when investors had piled into the greenback, reports Reuters.

Elsewhere the Canadian dollar and Mexican peso both made gains after reports that the U.S. administration had dropped a contentious demand related to auto-content, removing a key roadblock to a deal for a new North American Free-Trade Agreement (NAFTA).

The dollar fell 0.2 percent against a basket of currencies, after hitting a nearly three-week high on Tuesday.

The U.S. currency has been stuck in a trading range as investors wait for clarity on whether the policy-setting Federal Open Market Committee (FOMC) will forecast four rate hikes this year, instead of the median three hikes seen in December’s quarterly forecast.

Following the FOMC announcement at 1800 GMT, Jerome Powell will hold his first news conference as Fed chief at 1830 GMT.

Many analysts are questioning whether the dollar can rally much on the back of a more hawkish tone from the Federal Reserve, given so many investors still hold a bearish view.

The dollar sold off heavily at the start of the year on bets that trade and budget deficits would weigh on it, aided by comments by the U.S. Treasury Secretary that his government welcomed a weaker dollar.

“This FOMC will have to go some to really move the needle on market thinking or indeed, to take the dollar out of its current range and the FX market out of its mindset,” said Kit Juckes, chief FX Strategist at Societe Generale.

The two-year yield jumped to a near 9-1/2-year high of 2.3324 percent on Tuesday.

As the U.S. currency fell, the euro firmed 0.4 percent to $1.2282, having fallen 0.78 percent on Tuesday and hitting a near three-week low of $1.2240.

Against the yen, the dollar fell 0.2 percent to 106.31 yen, after Tuesday’s gains of 0.41 percent, though trading was slow due to a public holiday in Tokyo.