Dollar hit 7 week low in anticipation of Fed

The dollar hit a 7-week low in anticipation of Fed meeting

On Tuesday, the dollar fell to a 7-week low against a basket of currencies, amid growing nervousness in anticipation of the Fed meeting at which the decision will be made on interest rates.

By the end of the year, investors have changed their bearish against the euro. Traders report that many investors have begun to actively cover the position to sell euros to buy higher-yielding and risky assets, on high-yield corporate debt market in the United States.

A dangerous combination of falling oil prices and the prospects of raising US rates has caused tension in the junk bond market last week.

Tension heightened volatility in global stock markets and led to the question whether the Federal Reserve to raise interest rates do.

The US currency is now the most vulnerable for any surprises from the two-day meeting, which will end on Wednesday. Expectations and forecasts are reduced to the fact that the Federal Reserve will increase interest rates for the first time in nearly a decade. Official representatives of the Fed hinted that the rate increase will be gradual and relatively painless.

“Given all the problems, there is a risk that the Fed will choose a peaceful and gradual rise in rates,” – said Yudzhiro Goto, an analyst with the research team at Nomura. Currently, the way the Fed rate signals, at least about four promotions during the next year, and any fall will affect the dollar exchange rate, said Goto.

The dollar index fell to the lowest level of 97.19 and last traded at 97,355, down 0.3%.

The euro was up 0.4% at $ 1.1040 level, breaking the 7-week high level of $ 1.1060 earlier in the London session.

“The long dollar positions have disappeared from the market even faster than expected,” – said Junichi Ishikawa, a market strategist at IG Securities, Tokyo.

“On the news that the Fed rate increase will be slow, the US government securities can be bought up, which will create additional pressure.”

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