Dollar rising; as Fed meeting next week approaches

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The dollar edged higher on Thursday, with traders keeping their powder dry ahead of the Federal Reserve meeting next week, hoping for clues on when the central bank may begin reducing its monetary support. At 2:55 a.m. ET (0755 GMT), the Dollar Index, which measures the value of the US dollar against a basket of six other currencies, was 0.1 percent higher at 92.612.

The index has been trapped in a trading session between the two-week high of 92.887 at the start of the week and Tuesday’s one-week low of 92.321 following a weaker-than-expected inflation report. Despite dismal car registration numbers for August, USD/JPY was unchanged at 109.36, while EUR/USD was down by 0.2 percent to 1.1795. Risk-sensitive AUD/USD declined by 0.3 percent to 0.7310, despite Australia’s unexpectedly low unemployment rate of 4.5 percent.

A two-day policy meeting of the Federal Open Market Committee (FOMC) next week is expected to provide some clarity on the prospects for tapering and interest rate hikes. “If anything, the risks for the dollar heading into next week’s Fed meeting may be slightly tilted to the downside if markets cement their view that the tapering announcement will indeed be delayed,” said analysts at ING, in a note. The release of August retail sales data in the United States on Thursday at 8:30 a.m. ET (1230 GMT) is expected to confirm that sales fell again in August after falling in July. On a month-over-month basis, they are 0.8 percent lower than in July, when they were 1.1 percent lower.

Furthermore, the number of people filing for unemployment insurance for the first time in the United States is expected to rise to 330,000 for the week ending September 11 from 310,000 the previous week. In other news, the New Zealand dollar jumped 0.1 percent to 0.7110 after statistics released earlier Thursday revealed that the economy grew at a far quicker rate than predicted, with GDP increasing to 2.8 percent in the second quarter.

This strong growth has reinforced the belief that the country’s central bank will begin raising interest rates in the near future, after postponing a rate hike last month in reaction to an epidemic of Covid-19, which caused a draconian government lockdown.