HONG KONG- The yen remained under pressure on Tuesday and the Australian dollar was bruised by the latest lockdowns in China following new COVID-19 outbreaks, but moves were more muted than in recent days as traders eyes turned to this week’s Fed meeting.
The US Federal Reserve is set to raise rates for the first time since the pandemic at its meeting which concludes Wednesday, with traders looking for indications about the pace of future rate hikes.
Markets anticipate a 25 basis point rise at this meeting, according to the CME’s Fedwatch tool, but pricing has risen to indicate a 70 percent chance of a larger 50 basis point hike at its subsequent meeting in May, due to concerns about inflation.
“We think the statement and chair Powell’s press conference after the meeting will be influential in terms of market pricing for a 50 basis point rise in May and beyond, and that will impact the US dollar intraday,” said Carol Kong, an FX strategist at Commonwealth Bank of Australia.
The dollar index, which measures the greenback against six major peers was at 99.108, not far off the 99.415 touched a week ago, its highest level since May 2020.
The yen was at 118.37 per dollar on Tuesday morning, after tumbling sharply in recent sessions as the contrast between rising benchmark rates in the United States and low rates in Japan becomes ever more apparent as the Fed begins to tighten.
