The US Dollar had edged broadly higher earlier, lifted by the rise in yields of US Treasury instruments. That came on the heels of yesterday’s release of consumer spending figures which were unexpectedly upbeat and helped to boost some expectations that the Fed might consider a rate hike in the near term. Yields on 2-year Treasuries hit a 4-year peak while 10-year bonds hit a 2-month high. Analysts believe, however, that the Dollar could see some extreme volatility over the course of the next two days as markets await a Fed policy decision. That prediction proved true as the greenback flip flopped against many of its major peers.
As reported at 11:51 am (BDT) in London, the Dollar gained ground only against the common currency Euro; the EUR/USD was trading lower at $1.1239. Meanwhile the GBP/USD edged higher to $1.5402, the USD/JPY was down at 120.34 Yen, and the AUD/USD was up at $0.71680. The US Dollar Index, which traders use to assess the Dollar’s relative strength, was trading at 95.694 .DXY, a gain of 0.09%.
Fed Under the Microscope
Though the economic data does seem to support an interest rate hike, many analysts believe that the unfolding scenario in China will be the decisive factor. If the Fed’s FOMC doesn’t specifically state that global growth woes are driving its decision, FX traders will scrutinize Janet Yellen’s speech afterward for hints of any hawkishness.