By Ankur Banerjee
SINGAPORE, March 22 (Reuters) - The dollar was pinned
near five-week lows on Wednesday ahead of the conclusion of the
U.S. Federal Reserve's policy meeting, with investors awaiting
clarity on the path the central bank is likely to take in the
wake of global banking turmoil.
Investor attention is zeroed in on whether the Fed will
stick to its hawkish path to fight sticky inflation or pause
interest rate hikes given recent trouble among banks which has
included bankruptcy and last-minute rescues.
The U.S. dollar index , which measures the currency
against six peers, was at 103.19, just above the five-week low
of 102.99 touched overnight. The euro was at $1.0770,
hovering around a five-week high of $1.0789 scaled overnight.
Markets are now pricing in about a 15% chance of the Fed not
increasing rates, with a roughly 85% chance of a 25 basis point
hike, showed the CME FedWatch tool. Just a month earlier, the
market was pricing in a 24% chance of a 50 basis point hike.
Investor sentiment remained fragile with worries over the
outlook for the banking sector starting to ease after sharp
volatility in the market in the past few weeks following
high-profile U.S. banking failures earlier in the month and the
rescue of lender Credit Suisse Group AG at the weekend.
"Markets are seemingly becoming more comfortable with the
idea that authorities have probably done enough to prevent a
systemic banking crisis," said Rodrigo Catril, a senior currency
strategist at National Australia Bank in Sydney.
"It might be early days, but the price action over the past
48 hours is certainly signalling a change in mood by investors."
The Fed meeting concludes on Wednesday with the 2 p.m. EDT
(1800 GMT) release of a policy statement followed half an hour
later by a news conference by Chair Jerome Powell.
Catril said the Fed faces a difficult choice given a strong
labour market alongside February inflation figures that were
higher than many market watchers expected. Such circumstances
would usually be ripe for a return to a 50 basis point hike were
it not for worries over financial stability, he said.
Christopher Wong, currency strategist at OCBC, said the
focus will be on how the Fed communicates its forward guidance,
in particular "the higher for longer" rhetoric.
"Ideally, we would like the Fed to go with a 25 basis point
hike this meeting, tone down hawkish guidance and emphasize that
policy decisions at subsequent meetings will continue to be
data-dependent," Wong said. "This wishlist should see dollar
trade on the softer profile and risk proxies trade steadily."
Meanwhile, the yen strengthened 0.04% to 132.47
per dollar, whereas sterling was last trading at
$1.2233, up 0.16% on the day.
The Australian dollar rose 0.36% to $0.6694, while
the New Zealand dollar gained 0.11% to $0.6199.
In cryptocurrencies, bitcoin last rose 0.44% to
$28,276.58, but was below a nine-month peak it touched on
Monday.
========================================================
Currency bid prices at 0524 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0769 $1.0770 -0.01% +0.50% +1.0776 +1.0766
Dollar/Yen 132.4200 132.4900 -0.10% +0.86% +132.7650 +132.2650
Euro/Yen <EURJPY=EB 142.61 142.67 -0.04% +1.65% +143.0300 +142.4300
S>
Dollar/Swiss 0.9226 0.9223 +0.01% -0.24% +0.9230 +0.9215
Sterling/Dollar 1.2228 1.2219 +0.12% +1.15% +1.2236 +1.2209
Dollar/Canadian 1.3701 1.3713 -0.09% +1.11% +1.3718 +1.3700
Aussie/Dollar 0.6694 0.6671 +0.37% -1.78% +0.6696 +0.6662
NZ 0.6201 0.6194 +0.10% -2.35% +0.6204 +0.6173
Dollar/Dollar
All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Ankur Banerjee in Singapore; Editing by
Christopher Cushing and Stephen Coates)
Twitter: @AnkurBanerjee17;))
