Dollar edges up after U.S. inflation data as traders await Fed outcome
The dollar rose to a one-month high against a basket of currencies on Tuesday, aided by data showing inflation speeding up, but its gains were capped as traders awaited the outcome of the U.S. Federal Reserve’s two-day policy meeting for hints of plans to start tapering its bond purchases.
The dollar index, which measures the greenback against a basket of six currencies, was 0.04% higher at 90.529, after rising as high as 90.677, its highest since May 14.
Nearly 60% of economists in a Reuters poll expect a tapering announcement in the next quarter.
TREASURIES-Yields steady before Fed meeting statement
U.S. Treasury yields were steady on Tuesday ahead of the conclusion of the Federal Reserve's two-day meeting on Wednesday, which will be watched for any signals on when the U.S. central bank is likely to begin paring its massive bond purchase program.
The Fed is not expected to announce a taper until its August Jackson Hole economic symposium, though it may indicate that it has begun discussions about when it is likely to commence.
Policymakers will also update their economic projections and markets will focus on whether they upgrade their inflation projections and see a rate hike as likely in 2023.
Benchmark 10-year yields were little changed on the day at 1.499%. They fell to a three-month low of 1.428% on Friday and have dropped from a one-year high of 1.78% in March.
Another key focus at this week’s meeting will be whether the Fed raises the interest its pays on excess reserves (IOER) and on reverse repurchase agreements (repo) as money market investors struggle with a lack of high-quality short-term assets.
In cryptocurrencies, bitcoin hovered around the $40,000 level, a day after it climbed above that mark for the first time in more than two weeks, aided by the promise of fresh investment from major backer MicroStrategy and an upbeat tweet from Tesla boss Elon Musk.
Reference: Reuters
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