US Dollar Rises Against Most Major Peers Ahead of Federal Reserve Meeting

The US dollar rose against most of its major counterparts on Monday to begin the week on a positive note, as traders anticipated the outcome of the latest Federal Reserve meeting. However, solid inflation data in the eurozone pushed the euro higher against the greenback.

The Federal Open Market Committee will begin a meeting that will last two days tomorrow. Policymakers will decide whether adjustments to the monetary policy are required to maintain the health of the US economy.

Investors are almost certain that the decision, which is due to be announced on Wednesday, will keep interest rates unchanged. Future prices of federal funds show a mere 1.4% chance of lower rates, according to the CME FedWatch tool.

However, the monetary policy committee will publish a statement that may contain hints on the direction of the monetary policy in the near future. The possibility of an interest rate hike when the committee concludes its last meeting this year on December 13 currently has a 55.8% chance.

Better US inflation data than expected last Thursday raised hopes that the Federal Reserve may find a third interest rate hike for 2017 appropriate before the end of the year. Higher interest rates often support the greenback.

While the Federal Reserve is expected to keep interest rates unchanged in the September meeting, the central bank will likely announce a plan to begin reducing its balance sheet. Some analysts believe that such a plan may slow down the pace of interest rate hikes.

Stronger yields for US Treasury bonds today gave the US dollar more support. However, the shared currency moved higher following a fresh reading for the consumer price index of the European Union, which met estimates.

EUR/USD traded at 1.1961 at 15:05 GMT on Monday after starting the day at 1.1939. The pair’s highest level today was 1.1966 at 11:05 GMT. USD/JPY climbed to 111.48, a level last seen on July 26, from 111.16 at the beginning of the day, while GBP/USD dropped to 1.3905 from 1.3573 when trading started.

The Dollar Index, which measures the strength of the US dollar against other major currencies, rose to 91.92 as of 15:03 GMT today from 91.87 on Friday.

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