CURRENCIES: Dollar Heads Lower Ahead Of Expected Fed Rate Hike
December 19 2018 - 8:59AM
Dow Jones News
By Anneken Tappe, MarketWatch
Currency markets were muted ahead of the Federal Reserve's
interest-rate announcement on Wednesday, with the U.S. dollar
trading lower as investors adjust their expectations for what could
be coming.
"Today's main risk event for financial markets will be the
Federal Reserve' highly anticipated monetary policy announcement
this afternoon," said Lukman Otunuga, research analyst at FXTM.
"With a rate hike in December already heavily priced in, investors
will be more concerned with the policy statement, dot plots and
press conference for clues on the Fed's hiking path next year."
Don't miss:With a rate hike priced in, dollar traders wait for
Fed's 2019 guidance
(http://www.marketwatch.com/story/with-a-rate-hike-priced-in-dollar-traders-wait-for-feds-2019-guidance-2018-12-17)
Fed-funds futures put the likelihood of an interest-rate
increase at roughly 72%.
The ICE U.S. Dollar Index last stood at 96.847, down 0.3%.
"Should the Fed turn dovish, the euro could be the biggest
beneficiary of the flows with [an] Italian crisis now averted and
U.S. rates capped for the near term," said Boris Schlossberg,
managing director of FX strategy at BK Asset Management.
On Tuesday, Italy's government reached an agreement with the
European Union
(http://www.marketwatch.com/story/italy-reached-budget-agreement-with-european-union-reports-2018-12-18)
over its 2019 budget proposal. Rome's initial proposal was rejected
by Brussels as it would have violated EU fiscal rules, which led to
investors fretting over the health of the eurozone's third-largest
economy.
The euro bumped above the $1.14-mark again on Wednesday, last
buying $1.1405, compared with $1.1361.
In other central bank news, the Bank of Japan is due for its
policy rate update late Wednesday, or Thursday in the Asian
session. The Japanese yen was stronger, with one dollar buying
Yen112.34, down 0.2%.
On the trade front, Treasury Secretary Steven Mnuchin said late
Tuesday that the U.S. and China would meet in January
(http://www.marketwatch.com/story/treasury-sec-mnuchin-says-us-china-will-meet-again-in-january-bloomberg-2018-12-19)
to further negotiate on trade, according to a Bloomberg report.
Check out:Investors hope for policy cues from China's Xi are
quickly dashed
(http://www.marketwatch.com/story/investors-hope-for-policy-cues-from-chinas-xi-are-quickly-dashed-2018-12-18)
A slight rebound in oil prices meanwhile benefited
commodity-linked currencies that had sold off on Tuesday's
downturn. This included the Canadian dollar and Norwegian krone ,
the latter of which had hit its lowest level since January 2016
(http://www.marketwatch.com/story/dollar-struggles-with-risk-off-sentiment-renewed-trump-fed-comments-2018-12-18)
on Wednesday.
(END) Dow Jones Newswires
December 19, 2018 08:44 ET (13:44 GMT)
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