The US dollar reportedly remained strong near two-decade highs against major currencies on Tuesday as investors held on to expectations of another aggressive rate hike by the Federal Reserve.
Sweden's central bank set a hawkish tone for the week by raising rates by a full percentage point on Tuesday. The rate hike by the Riksbank was larger than analysts had expected, causing the Swedish currency to briefly surge against the euro and US dollar.
However, it failed to maintain that momentum with the euro surging to a trading level of 10.46 against the crowns. The US dollar jumped 0.36% to a trading level of 10.82 crowns.
Market focus on the FOMC meeting which will focus on setting interest rates. The market has pegged the probability of a 75 basis point increase, with about a 15% chance of a full percentage point increase.
The US dollar index which measures the US dollar against six major currencies strengthened 0.34% to trade at 109.838. While providing additional support, U.S. Treasury yields The two-year yield, which is highly sensitive to policy expectations, rose as high as 3.992% in early London trade.
Markets also focused on U.S. housing data. The latest report shows that house construction increased unexpectedly in August. Housing starts jumped 12.2% year-on-year to 1.575 million in August.
The euro lost 0.29% to trade at 0.9992 against the US dollar. While sterling lost 0.13% to trade at 1.1416. The Bank of England will decide on policy on Thursday, and investors are torn between a hike of 50 or 75 basis points.
