The dollar remained higher near a seven-week high during the course of the session on Thursday due to an increasing signs given by the Federal Reserve officials that the U.S. central bank has been considering a rate hike for this month.
Federal Reserve Governor Lael Brainard said later Wednesday that an improving global economy, along with a solid U.S. recovery suggests the Fed to finally raise interest rates.
The dollar index, which gauges the dollar against a basket of major rivals remained slightly higher at 101.91. The index rose to 101.97 on Wednesday, marking its highest since Jan. 11.
Meanwhile, the dollar found support on Tuesday after two influential Fed policymakers, William Dudley and John Williams cited that policymakers are worried about waiting too long in the wake of a pending economic stimulus from Washington.
"The Fed is likely to raise interest rates this month unless the U.S. jobs data due next week is bad," strategist Yukio Ishizuki said.
Based on CME Group’s FedWatch Tool, futures traders are currently priced in at a 66 percent chance of a Fed hike in March, up from 35 percent during the session on Wednesday.
Investors were disappointed with U.S. President Donald Trump’s unclear statement on his economic plans, but outlined broad tax cuts, including a $1 trillion public-private initiative for road and bridge reconstructions.
"Investors liked that Trump was behaving well during his speech although it lacked specifics in policies," said Daiwa's Ishizuki.
Expectations on the Dollar
Currency strategists said that Ms Brainard is “usually cautious in her comments about monetary tightening” and that the dollar is expected to remain solid over the next two weeks, “unless the Fed softens its language again”.
Additionally, New York Fed President William Dudley said on Tuesday that the case for a tighter monetary policy had become "a lot more compelling".
“We expect that the Fed will also hike in September and December," said economist Andreas Johnson.
"A September hike would provide some time for more details about economic policy to emerge from the Trump administration and also allow for a gradual tightening of monetary policy."
The chart below illustrates the price movement of the dollar with the increasing signs given by the Fed that a rate hike for this month is being considered.
Given a bullish tone on the pair, the RSI suggests that the overbought level has not been reached, which could signal that the price is biased for a rally.
Further, the pair is currently changing hands in a light trading volume and the RSI stood at 60.1067.
As the dollar found support on the most anticipated Fed’s monetary policy decision on interest rates, it is expected that it will give a huge impact on the prices and the market prone to volatility until any further details.
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