By Peter Nurse
Investing.com – The US dollar lost ground at the start of trading in Europe on Tuesday, although it remained near 20-year highs, as the market braces for another aggressive rate hike from the Federal Reserve.
At 8:50 AM ET, the , which tracks this currency against a basket of six other majors, is down 0.1% at 109.297, still close to two-decade highs of 110. .79 on September 7.
The US Federal Reserve begins its final two-day monetary policy meeting later today, and it looks like it will continue its policy of large-scale interest rate hikes to try to curb superheated inflation.
A 75 basis point hike is expected, although some investors are poised to implement a full percentage point hike, as last week’s consumer price index showed inflation remains stubbornly high.
The decision will be accompanied by a new set of forecasts for inflation, economic growth and the future path of interest rates, which will be closely watched to guide the central bank towards its terminal or maximum rate.
The pair is up 0.1% to the 1.0035 level, reinforcing its position above parity after rising in August at its fastest pace on record, 45.8% above the same month of the previous year, with the rise in energy prices as the main driver.
The European Central Bank raised interest rates by 75 basis points last week in an attempt to tackle near-double-digit inflation. This news from the largest economy in the eurozone can only strengthen their resolve.
The pair is up 0.1% to the 143.32 level, with the yen weighed down by higher , which has reached 3.970% overnight for the first time since November 2007.
The Bank of Japan will hold a monetary policy meeting on Thursday, but all indications are that it will keep its stimulus measures unchanged.
The pair is up 0.1% to 1.1442, with sterling recovering somewhat after falling late last week to 1.1351, a 37-year low.
The Bank of England will also decide its monetary policy on Thursday, and a further interest rate hike of 50 or 75 basis points is expected.
The pair is posting a 0.1% gain to the 7.0128 level, holding above the psychologically important 7 level as the Chinese authorities have to strike a delicate balance between easing monetary policy to support a weakened economy and the prevention of further currency losses.
On the other hand, the pair is up 0.1% to the level of 10.7734, and 0.2% to 10.8069, pending the meeting of the Swedish to be held later in the day. , and which is expected to give rise to a monetary adjustment.