The US dollar traded higher on Wednesday showing a jump close to recent peaks against the euro and yen ahead of announcements from the U.S. Federal Reserve (the Fed) on monetary stimulus easing and indications from Jerome Powell on inflation.
The Fed will issue a statement that will likely begin reducing its $ 120 billion -a -month asset purchase program at 2 p.m.
According to a currency analyst at TD Securities, "the market will pay attention to any indications of a reduction in bond purchases and any signs of a surge in inflation." .
The US dollar index, which measures the greenback against major currencies, strengthened 0.27% to a trading level of 94.135 before declining to 94.112.
On the other side. European central banker Christine Lagarde said raising interest rates in 2022 was difficult as inflation would be at a low level, resulting in lower government bond yields.
The Euro strengthened against the US dollar by 0.06% to the trading level of 1.1583.
The Fed’s announcement will come after a meeting of the Reserve Bank of Australia on Tuesday and the ECB last Wednesday, which both issued a dovish tone. The market is worried the same will happen at a later announcement and will disrupt the bond market.
Analysts are throwing questions to the market that the main question so far is about the extent to which interest rate hikes are effective in controlling inflation, mainly driven by supply chain issues.
