SINGAPORE- The dollar eased slightly from a one-month high on Thursday, after the Federal Reserve set the stage for rate hikes next year but left enough breathing room to slow things down if necessary, while sterling traded firmly ahead of a Bank of England meeting.
In an Asia session thinned by a holiday in Japan, the euro bounced a bit to $1.1705, scraping off a one-month low. Sterling was up 0.1 percent to $1.3643 as investors weighed the risk of a hawkish surprise from the central bank.
Other moves were pretty modest, with the greenback staying near multi-week highs against the Australian and New Zealand dollars and holding onto gains made against the yen in the wake of the Fed meeting. It bought 109.80 yen.
The Fed left policy settings unchanged on Wednesday and, as expected, did not announce the beginning of asset purchase tapering. But chair Jerome Powell flagged that it was not far off, perhaps as near as November, and said board members thought tapering could conclude around mid-2022 – opening the way for rate hikes after that.
As well as helping the dollar, the US yield curve flattened and Fed funds futures markets moved to price a 50 percent chance of a hike in October and to fully price a 25 basis point rate hike in December after his comments. – Reuters
