Dollar stands tall in blockbuster week for central banks

Milan

THE US dollar edged higher on Monday (Dec 13) ahead of a slew of central bank meetings this week including the US Federal Reserve, with investors eyeing how quickly it will unwind bond buying and looking for clues on when it will start to raise rates in 2022.

The euro fell, as it is seen as vulnerable to a rate hike in the United States on expectations that the Fed will tighten policy more quickly than the dovish European Central Bank.

The dollar index, which measures the greenback against 6 major peers, was up 0.3 per cent at 96.38. The euro was down 0.4 per cent at US$1.1268.

"We see moderate hawkish risks into the December FOMC (Federal Open Market Committee) on Wednesday, as the Fed mainly remains focused on optionality to respond to the possibility of continued inflation," Citi analysts said in a note, adding they are "tactically bearish EURUSD into this week."

But some analysts believe the dollar's march higher in recent weeks has already factored in many of its possible sources of strength in the short term.

The Norwegian krone was down 0.6 per cent against the US dollar. The Norges Bank, which said it will maintain a policy of not buying Norwegian krones on behalf of the country's government in December, is widely expected to raise its benchmark interest rate on Thursday.

The pound lost 0.2 per cent to US$1.3245 after British Prime Minister Boris Johnson said on Sunday that Britain faced a "tidal wave" of the Omicron variant.

The Swiss franc was flat, remaining not far from its highest level since end-June 2015 versus the euro at 1.0373.

The Swiss National Bank, which has been battling the appreciation of the franc since the start of the pandemic, is due to make its latest interest rates decision on Thursday and has stepped up its intervention against the franc.

The Turkish lira trimmed some losses as the central bank was in the market selling dollars. It was down 1.7 per cent at 14.12 versus the greenback, after hitting an all-time low at 14.99 on persisting concerns about President Tayyip Erdogan's low-interest rate policy and before a rate decision later this week. REUTERS