Dollar Edges Higher; ECB Next as Central Bankers Meet

By Peter Nurse

Investing.com – The dollar edged higher in early European hours Thursday, with policy decisions by central bankers in Australia, Japan and Europe jolting trading.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 93.835, with movements seen limited ahead of next week’s policy-setting meeting by the Federal Reserve.

USD/JPY traded 0.2% lower at 113.56 after the Bank of Japan kept its interest rates and asset buying plans unchanged Thursday. The central bank also cut its projection for economic growth this fiscal year and also reduced its inflation forecast to zero for the year ending in March 2022 from 0.6%, suggesting it will lag other central banks in reining in its accommodative monetary policies. 

Earlier in the day Australia’s central bank decided against buying a government bond central to its stimulus program even though yields were well above its target of 0.1%. This fuelled market expectation that the Reserve Bank of Australia will lift its 0.1% benchmark interest rate much sooner than the previous guidance of 2024, perhaps even by mid-2022.

AUD/USD traded 0.1% lower at 0.7504, still near its three month high.

Additionally, USD/CAD rose 0.2% to 1.2374 after the Bank of Canada ended its bond-buying stimulus on Wednesday, suggesting it could hike interest rates as soon as April 2022 as it seeks to tackle elevated inflation levels. 

EUR/USD traded flat at 1.1604, just above its 15-month low of 1.1523 hit earlier this month ahead of the European Central Bank’s policy-setting meeting later Thursday.

The ECB is widely expected to use its December meeting to announce key decisions about its emergency stimulus policies, but the strong rise in inflationary pressures has lifted rate-hike expectations.

“It still seems rather far-fetched that the ECB will move its benchmark rates as early as next year,” said analysts at Nordea, in a note, “and [ECB President Christine] Lagarde will probably seek to tone down current market pricing.”  

Elsewhere, GBP/USD edged lower to 1.3742 the day after U.K. Chancellor of the Exchequer Rishi Sunak delivered his annual budget, committing to real-term increases in spending on the back of upgraded forecasts to economic growth and tax revenues.

Market analytics

Other news

Nokia’s third quarter profit beats expectation
HELSINKI (Reuters) -Telecom equipment maker Nokia (NYSE:NOK) reported stronger-than-expected third-quarter operating profits on Thursday as development investments, strategy updates and cost cuts continued to drive a turnaround in the business. Third-quarter net sales rose 2% to 5.4 billion euros ($6.27 billion) from 5.3 billion a year ago, in line with analyst expectations. “The third quarter […]
READ
Dollar Edges Higher; ECB Next as Central Bankers Meet
By Peter Nurse Investing.com – The dollar edged higher in early European hours Thursday, with policy decisions by central bankers in Australia, Japan and Europe jolting trading. At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 93.835, with movements seen […]
READ
Dollar Down, but Near Year High as Investors Await Fed’s…
The dollar was down on Wednesday morning in Asia but held near a one-year high amid rising speculation that the U.S. Federal Reserve will announce the beginning of asset tapering in November 2021, followed by potential interest rate hikes by the middle of 2022. The U.S. Dollar Index that tracks the greenback against a basket of other […]
READ
Pound Vulnerable to Stagflation Clutches as Brexit Impact Emerges
The pound is unlikely to be rescued by the increasing odds of a Bank of England rate hike as the currency may struggle to escape the clutches of stagflation just as the impact of Brexit begins to emerge.  GBP/USD was flat at $1.3594. “GBP’s fall from grace has been swift. Stagflation is the current buzzword which […]
READ
Dollar Rally Faces ‘Critical Resistance,’ But Bulls Will Hold The…
The dollar is approaching ‘critical resistance’ that may force some to take profit, but this isn’t the time to turn bearish as any dips will likely be bought paving the way for further upside, experts say. The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose 0.22% to 93.99. […]
READ
Dollar climbs as energy surge drives inflation worries
The dollar edged higher on Wednesday amid nervousness that surging energy prices could spur inflation and interest rate hikes, and as traders awaited U.S. jobs data for clues on the timing of Federal Reserve policy tightening. The Reserve Bank of New Zealand lifted its official cash rate for the first time in seven years but […]
READ