The US Dollar edged higher against the Euro, Yen and Pound on Tuesday as investors prepared for a busy week of major central bank decisions that could influence the interest rate outlook, alongside a raft of corporate earnings with the potential to move markets across asset classes.
The Federal Reserve is due to announce its latest policy decision on Wednesday, followed by the European Central Bank on Thursday and the Bank of Japan on Friday.
All three central banks are widely expected to leave interest rates unchanged, putting the spotlight on policymakers’ comments for clues about the direction of monetary policy in the months ahead.
The Dollar also drew support from a calmer equity market, particularly against safe-haven currencies such as the Yen and Swiss Franc. Stocks had been rocked last week by renewed concerns over soaring valuations among high-flying AI companies.
The Dollar gained 0.16% against the Yen to 157.73. Meanwhile, the Euro fell 0.17% to $1.1154, while Sterling slipped 0.14% to $1.3324.
Markets were positioning ahead of the Fed meeting, with investors expecting Chair Kevin Warsh to reaffirm his commitment to tackling inflation, a stance that could provide further support for the Dollar, Reuters news agency reports.
Other factors are also influencing markets. Japan’s services sector inflation gauge rose 3.7% year-on-year in September, data released on Tuesday showed, pointing to mounting price pressures that could keep the Bank of Japan on course for more interest rate hikes.
Japanese Finance Minister Satsuki Katayama said on Tuesday that the government was prepared to take decisive action in currency markets, reinforcing the prospect of intervention to support the Yen.
The Yen was one of the strongest-performing major currencies last week, gaining around 0.75% against the Dollar, its biggest weekly rise since early September, as concerns over AI valuations rattled stock markets and prompted investors to seek safety in the Japanese currency.
By contrast, the Euro was set to be the weakest-performing developed-market currency in October, having lost 1.5% against the Dollar. It has come under pressure from elevated energy costs, volatility in French government bonds and concerns over France’s public finances.
The Reserve Bank of New Zealand and the Bank of Canada are also due to announce their policy decisions on Wednesday, with both expected to raise interest rates.
Ahead of the RBNZ meeting, the New Zealand Dollar was among the better performers, edging up 0.1% against the US Dollar to $0.5687 on Tuesday.
The Canadian Dollar was little changed at C$1.4021 per US Dollar.