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LONDON. – The dollar traded around one-week highs against a basket of major currencies yesterday, with moves limited in the countdown to an expected hike in US interest rates later in the day. Another 2 percent fall in Brent crude prices sent the Norwegian crown a full percentage point lower and Canada’s dollar to the latest of a series of 11-1/2 year lows against its US counterpart.
But moves on major currency pairs were subdued ahead of a Fed decision at 1900 GMT, widely expected to deliver its first rate increase in nearly a decade. Analysts from Citi, the FX market’s single biggest player and hedge funds’ partner of choice, said positioning in the dollar against the euro has turned all but flat after a clearout over the past fortnight.
That suggests the action after the Fed’s move, a sea change in the shape of global monetary policy, is more likely to come on a handful of emerging currencies and in credit and other markets than on the big FX pairs.
“Markets are going into the announcement expecting a rate hike but, on the surface at least, relatively relaxed that it is priced in,” said Kit Juckes, a strategist with France’s Societe Generale in London.
“If 10-year treasury yields stay close to today’s levels, I don’t see much of a move in the euro or yen. But I do think that in the long run there is enough momentum in the US economy for yields to edge higher and that will drag the Euro lower.” – Reuters.
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