US Dollar May Rise as Fed Sets Stage for December Rate Hike

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by  Ilya SpivakCurrency Strategist 

Currency markets are likely to look past a relatively quiet European economic calendar to focus on Federal Reserve rate decision due later in the day. A change in policy looks exceedingly unlikely but traders are keen to dissect the FOMC committee’s statement to see if Chair Yellen and company will demonstrably signal that an interest rate hike is on tap in December.

As it stands, investors price in the probability of a December rate hike at 68 percent. A hawkish policy statement matching the tone of recent Fed rhetoric coupled with steady dissent from pro-hike officials may boost conviction, sending the US Dollar broadly higher.

The anti-risk Japanese Yen outperformed while the sentiment-geared Australian and Canadian Dollars traded lower as risk appetite soured in Asian trade. Regional shares followed a rout on Wall Street, with regional bourses losing more than 1 percent on average. The New Zealand Dollar diverged from its commodity bloc counterparts, finding support in upbeat labor-market data.

 

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