LONDON: The dollar edged up on Wednesday, a day after falling amid a flight to safety as a Russian currency crisis took hold and as speculation grew that the Federal Reserve might take a more cautious tone on monetary policy.
The rouble's collapse - 50 percent so far this year - slowed slightly as Russia's finance ministry said it had started selling foreign currency while Brent crude, which has also almost halved in value since June, held near a 5-1/2-year trough of less than $60 a barrel.
Having hit a one-month low against the safe-haven yen on Tuesday at 115.565, the dollar was up 0.6 percent at 117.135. The yen was also hit by data showing Japanese exports missed forecasts in November, keeping policy pressure on the re-elected Japanese premier Shinzo Abe.
Many expect the Fed to drop its use of the phrase "considerable time" to describe how long interest rates will stay near zero in its final policy statement of the year, due at 1900 GMT. But some are betting the plunge in the value of oil and the rouble will make the central bank more cautious.
"The overriding theme of the week has been safe-havens, and that is a message to the Fed: do they really want to hike interest rates and worsen this nervous international backdrop?" said Jane Foley, senior strategist at Rabobank in London.
"Given that I think they've got plenty of domestic reasons, like inflation, to remain cautious, I think they will."
The dollar also recovered ground against the euro, which was down about 0.4 percent at $1.2459 ahead of the first round of a fraught Greek presidential election.
That helped the dollar rise 0.2 percent against a basket of major currencies to 88.257, up from a three-week low of 87.627 on Tuesday.
"It's fair to say that we're to a large degree on hold until we get a clear idea about what the Fed is actually going to do, and that matters most pertinently because of what it means for the oil price," said Simon Derrick, chief currency strategist at Bank of New York Mellon in London.
Derrick said if a change in the Fed's language prompted a surge in the dollar, oil prices may decline further, potentially feeding through into greater turmoil across markets.
Comments
Comments are closed for this article.