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Dollar steady ahead of Fed rate-hike decision

By AFP
16 December 2015   |   7:41 am
The dollar held steady on Wednesday after upbeat US inflation figures all but sealed the case for a Federal Reserve interest rate hike, analysts said. Financial markets are focused on the US central bank's last 2015 meeting, which wraps up Wednesday, with policymakers likely to give the go-ahead to a rate rise for the first…
Dollar Stock and money. Photo: investing-for-the-future

Dollar Stock and money. Photo: investing-for-the-future

The dollar held steady on Wednesday after upbeat US inflation figures all but sealed the case for a Federal Reserve interest rate hike, analysts said.

Financial markets are focused on the US central bank’s last 2015 meeting, which wraps up Wednesday, with policymakers likely to give the go-ahead to a rate rise for the first time in almost a decade.

The case for a rate lift-off — which is a plus for the dollar — has grown stronger over the past year as the world’s top economy appeared to be staging a firm recovery.

That view got another boost Tuesday as fresh November data showed an inflation gauge that excludes volatile food and energy prices hit the Fed’s 2.0 percent target.

“For (Fed Chair) Janet Yellen, who has been at pains to emphasise her concern of inflation overshooting if rates are not hiked in 2015, this final data point surely locks in the Fed rate rise now,” Angus Nicholson, a market analyst with IG Ltd. in Melbourne, wrote in a commentary.

The benchmark federal funds rate has been pegged near zero since December 2008 to support the economy’s recovery from deep recession.

In Tokyo trading, the dollar rose to 121.87 yen from 121.66 yen Tuesday in New York, while it gained 0.18 percent against the Malaysian ringgit, and also ticked up against the Taiwanese dollar, Thai baht, Indonesian rupiah and Singapore dollar.

However, the South Korean won rose 0.67 percent on the greenback, as it bounced off recent drops.

The euro edged up to $1.0936 and 133.18 yen from $1.0930 and 132.97 yen in US trading.

The pound ticked up to $1.5050 from $1.5039 while the dollar edged down to 0.9901 Swiss Francs against 0.9914 francs in New York.

While markets have been pricing in a rate hike, analysts said there was still room for the dollar to strengthen.

“Money markets have not fully discounted a Fed rate hike, so there is scope for the US dollar to have a knee-jerk upside reaction,” Elias Haddad, a currency strategist at Commonwealth Bank of Australia, told Bloomberg News.

“We expect the (Federal Open Market Committee) to emphasise that its tightening cycle will be gradual. This should slow rather than reverse the uptrend in the dollar.”

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