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© Reuters
By Peter Nurse
Investing.com – The US dollar lost ground at the start of trading in Europe on Wednesday, with traders remaining cautious ahead of the conclusion of a crucial Federal Reserve meeting.
At 1000 AM ET, the , which tracks this currency against a basket of six other majors, is down 0.1% at 111.225, not far off Tuesday’s high of 111. .78, its highest level since October 25.
Everything indicates that the Fed will raise interest rates again by 75 basis points this Wednesday, its fourth consecutive rise. But the market is divided on the size of December’s hike, especially after recent suggestions from Fed officials about a possible slowdown in the pace of monetary policy tightening.
That said, the central bank could easily maintain its aggressive pace of rate tightening as the labor market remains tight and there are no signs of easing in core inflation.
“Our bet is that the Fed will raise rates at a reduced rate, of 50 basis points, at the December meeting”, say analysts at ABN Amro (AS:), “after that, we think there will be a pause in the adjustment” .
“However, we doubt the Fed will be in any rush to announce it at the next meeting. If the Fed chooses to signal a more modest rate hike in December, it will likely use language that suggests rates may need to go higher.” than was thought.”
The dollar still has enough strength left to retake or break its recent highs and resume its relentless rise, according to a Reuters poll of currency strategists, suggesting its pullback is temporary.
The pair is up 0.1% to the 0.9879 level, close to the one-week low of 0.9853 the previous day, before the final data for the euro zone is published at the end of the day. of the week, which should illustrate that the region is headed for a recession.
The pair is up 0.1% to the 1.1499 level, ahead of Thursday’s monetary policy meeting, where markets expect a 75 basis point interest rate hike, and which was reached by double figures in September.
The pair is down 0.7% to the 147.26 level as traders remain wary of intervention after Japanese officials confirmed the country has spent a record $42.8bn on currency interventions this month. to support the yen.
Bank of Japan Governor Haruhiko Kuroda has also favored the yen, saying a tightening of the bank’s ultra-prudent monetary policy may be possible if the country declines.
The pair is up 0.3% to the 0.6414 level, while the yuan slips to 7.2756, with the yuan buoyed by unconfirmed reports that Chinese authorities are considering relaxing the country’s strict Covid policy. , which has weighed on economic activity this year.
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