The dollar, on Wednesday, July 26, edged higher, surging from a 13-month low hit in the previous session as investors trimmed some short bets before a Federal Reserve policy decision.
The dollar edged up 0.1 percent to 94.19 against a trade-weighted basket of its rivals. It fell to a 13-month low of 93.638 on Tuesday.
Markets have reduced expectations for a U.S. interest rate increase in the coming months with expectations of another rate hike at less than 50 percent before the end of the year, according to Reuters polls and CME’s Fedwatch tool.
“If there is no change in the language of the statement, we can expect a mild dollar rally and there would be a better opportunity for the Fed to communicate its policy expectations at Jackson Hole next month,” Commerzbank currency strategist Ulrich Leuchtmann said.
The U.S. central bank will issue its decision following the end of a two-day policy meeting at 1800 GMT. Economists expect the Fed’s benchmark lending rate to remain in a target range of 1.00 percent to 1.25 percent.
The euro was a shade lower at $1.1631. On Tuesday, it rose as high as $1.17125, its highest since August 2015, and just a hair below a 2-1/2-year peak, boosted by a stronger-than-expected German business survey.
The Australian dollar fell after data showed the country’s consumer inflation was surprisingly soft in the last quarter.. It shed 0.6 percent to $0.7888.
Global Stocks Close Higher Buoyed by Oil Price Surge
Stock markets rose higher on Wednesday, July 26, buoyed by a surge in oil prices and company results and economic data continued to soothe worries that the world economy may be ripe for a another slowdown.
European stock markets were mainly higher, led by energy and commodity-linked companies after Brent crude topped the $50 mark for the first time since early June.
A slightly less bullish performance in Asia pulled the MSCI world equity index, which tracks shares in 46 countries, off all-time highs overnight. But early in the European session, it was up 0.1 percent on the day.
Strong results from energy firms Subsea 7 and Tullow Oil helped European shares while banks weighed on index-level gains as investors awaited a Fed policy decision and UK GDP figures.
“The indications are more positive on the outlook for energy stocks. While there was a lot of kitchen sinking from firms in Q2 numbers, they have reset the expectations over the valuations now, they have cleaned up balance sheets,” said Angelo Meda, head of equities at Banor SIM in Milan.
The pan-European STOXX 600 gained 0.3 percent, in line with euro zone stocks and blue-chips, as oil and gas stocks gained 0.8 percent.
Germany’s Ifo business survey on Tuesday showed confidence soaring to record highs in July amid what its economists described as a ‘euphoric’ mood in German industry while U.S. consumer confidence levels jumped to near 16-year highs.
The latter numbers helped the dollar recover some ground in U.S. and Asian trading on Tuesday, with traders citing a trimming of positions ahead of the Fed meeting, not due until late in the U.S. session. (1800 GMT)
The dollar, hurt since March by a retreat in expectations for further rises in interest rates this year, gained just over 0.1 percent against both the euro and the euro-dominated basket of currencies most used to measure its broader strength.
“Most people have an ultra benign view of what we will get out of the Fed today,” said Koon Chow, a strategist at Swiss private bank UBP.
“The focus is not so much on the next hike but the start of the roll off [reduction of the central bank’s balance sheet]. The Fed has already helped us a lot by indicating that when it happens it will be a very gradual process.”
