The US dollar declined on Wednesday as markets anticipate the outcome of the Federal Reserve’s monetary policy meeting.
Investors would be focusing on Fed’s interest rate decision today, and it is widely expected that the US central bank will announce at the end of its two-day assembly later in the day that they will be winding down their $4.4 trillion balance sheet by October.
The bank’s policymakers are also expected to provide hints with regards to the possibility for an interest rate hike at their two-day meeting in December.
Economist Ayako Sera said that the greenback’s minor movements were a result of investors’ anxiety towards Fed, with focus still set on the dot chart.
Fed Chair Janet Yellen is also expected to declare further tightening of monetary stimulus which could be a hawkish step to the bank’s move to normalizing policy among the global central banking elite.
US Dollar Treading Water
The US dollar remains on an anxious state against its major rival currencies amid the Federal Reserve Open Market Committee (FOMC) meeting, with the dollar index down by 0.2 percent to $91.44 but is still far from its 2-1/2 year low of 91.01 in September.
The greenback edged lower against the Japanese yen by 0.3 percent to 111.29, inching a bit away to its eight-week high of 111.88.
The main factor for the yen this week would not be the growing geopolitical tensions between the US and North Korea, rather it is Japanese Prime Minister Shinzo Abe, who is considering of announcing an election as early as next month.
Currency strategist Masashi Murata said that Abe’s policy statements should be able to support the dollar against the yen, adding that if the greenback could break above its 200-day moving average around 112.20, then the 115 level would be its next target.
The US dollar was also down by 0.4 percent to 1.2241 against its Canadian counterpart, while it lost 0.3 percent to 0.9602 against the Swiss franc.
Other major currencies, including the euro and the pound benefitted from the greenback’s shortcomings as they rose 0.2 percent to 1.2012 and 0.4 percent to 1.3556 per dollar respectively.
New Zealand Dollar Hits 6-week High
Out of the high-earning currencies, the New Zealand dollar seems to be the most active as it buoyed on Wednesday following a poll showed that the National Party outperformed its rival ahead of the country’s general election on September 23.
After spending most of the session on the defensive in Tuesday, the kiwi strengthened as much as 0.7 percent to 0.7356 against the dollar, after reaching an intraday high of 0.7365, the most stable level in six weeks.
The National Party rose by 6 points to 46 percent compared to last week’s poll while Labor shed 7 points to 37 percent.
However, any more gains in the kiwi could be restrained as markets are still awaiting the conclusion of the Fed meeting later in the day.
Another high-earning currency, the Australian dollar, was also up by 0.6 percent to 0.8055 against its American counterpart.