Dollar holds steady ahead of Fed rate decision
TLT•The US dollar was flat against major currencies ahead of the Federal Reserve’s rate decision, while traders saw a 78% chance of a December rate hike of at least 25 basis points. The New Zealand dollar fell as much as 1.21% after its central bank held rates at 2.75%; the Bank of Canada raised its key rate by 25 basis points.
1. Dollar steady before Fed decision
The US dollar was flat against major currencies on Wednesday ahead of the Federal Reserve’s interest rate decision. The dollar index was unchanged at 102.37, while the two-year Treasury yield rose 3.73 basis points to 4.774%. Traders expected the Fed to leave policy unchanged but saw a 78% chance of a rate increase of at least 25 basis points in December.
2. Currencies react to rate moves
The New Zealand dollar fell as much as 1.21% to $0.5612 after the Reserve Bank of New Zealand unexpectedly held its policy rate at 2.75%. The Bank of Canada raised its key rate by 25 basis points, as expected, and said further increases might be needed to prevent higher energy costs from fueling broader inflation; the Canadian dollar was little changed.
3. Sterling and other central banks
Sterling was flat against the dollar at $1.33 after the UK finance minister presented a budget that included tax increases and tighter value-added tax rules for online marketplaces. The European Central Bank and Bank of Japan were expected to leave rates unchanged at policy decisions later in the week.
