NEW YORK: The US dollar edged down on Wednesday but stuck to familiar ranges against major currencies as investors awaited a Federal Reserve interest-rate decision, with some analysts warning that an interest-rate hike cannot be ruled out.
Hostilities in the Middle East flared anew, sending oil prices higher, after joint strikes by US and Saudi Arabia on Iran-backed groups in Iraq. The strikes came hours after the US military said it had averted a surprise Iranian attack on US troops in the region.
Moves in currencies were largely subdued as investors stayed on the sidelines ahead of the Federal Open Market Committee’s decision, with markets pricing in a roughly 36 percent chance of a 25-basis-point hike.
The dollar index, which tracks the US currency against a basket of six others, was down 0.04 percent at 101.38. “Today’s Fed decision is incredibly hard to gauge,” said Kyle Chapman, FX markets analyst at Ballinger Group in London.
“A hold with a hawkish twist is the most likely outcome here, and in theory that should force an immediate repricing of short-term rates that hurts the dollar,” he said.
Kyle, however, warned that a lot of weight is going to be placed on the vote split, as investors look for clues to policymakers’ thinking.
“Warsh has given neither any indication as to the path for rates, nor any fundamental strategy or framework with which the Fed is likely to process the incoming data. I expect him to stay quiet once again,” Kyle said.
The euro edged up 0.03 percent to USD1.138875, while sterling was about flat at USD1.32925, but remained near its weakest level since July 1.
The loonie was trading 0.2 percent higher at CUSD1.4085 to the greenback, or 70.98 US cents.
While the US central bank is widely expected to keep rates unchanged, limited guidance from Chair Kevin Warsh coupled with higher oil prices have prompted a growing number of brokerages to pencil in the risk of a surprise rate hike.
Against the yen, the dollar slipped 0.05 percent to 163.78 yen, but remained not far from a 40-year high and kept traders on alert for potential intervention from Japanese authorities to support it.
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