Dollar finds footing ahead of Fed meet

SINGAPORE: The US dollar steadied on Monday after two weeks of selling, ahead of a week crammed with central bank meetings and headlined by the US Federal Reserve, where an interest rate cut is all but priced in but a divided committee makes for a wild card.

Besides Wednesday’s Fed decision, central bank policy meetings are also due in Australia, Brazil, Canada and Switzerland, though no moves are expected outside of the Fed.

The euro , which has been trading in a reasonably tight range since June, hovered at $1.1644. The yen , which has found a footing after sliding through November, traded at 155.28 a dollar.

Analysts expect a “hawkish cut”, where the language of the statement, median forecasts and Chair Jerome Powell’s press conference point to a higher bar on further rate reduction.

That could support the dollar if it pushes investors to dial back expectations for two or three rate cuts next year.

“We expect to see some dissents, potentially from both hawkish and dovish members,” said BNY’s head of markets macro strategy Bob Savage in a note to clients.

The Australian dollar traded just below last week’s two-and-a-half-month high at $0.6640, taking a breather after having rallied through 200-day and 50-day moving averages in recent weeks as markets swung away from expecting rate cuts.

The Reserve Bank of Australia meets on Tuesday after a run of hot data on inflation, economic growth and household spending. Futures implying the next move will be up and possibly as soon as May, leaving the focus on the post-meeting statement and media conference.

“We expect the RBA to be on an extended hold, with the cash rate to remain at its current level of 3.60%,” said analysts at ANZ in a note last week, where they revised previous expectations for a cut.

A similar dynamic in Canada had the loonie surging to a 10-week high on Friday following strong labour data. The Bank of Canada is widely expected to leave its interest rate on hold on Wednesday and a hike is fully priced by December 2026.

The currency was marginally weaker at C$1.3829 early on Monday.

The New Zealand dollar idled at $0.5779, while the Swiss franc edged 0.1% lower to 0.8045 per U.S. dollar.

Subdued inflation is seen keeping Switzerland’s policy interest rate at 0% for a while.

Sterling was pinned near its 200-day moving average at $1.3324, while China’s yuan was taking a breather at 7.068 a dollar in offshore trade.

A hold is widely expected in Brazil, where the policy rate is at 15%, with a possible nod towards a cut next quarter.