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Dollar hovers near mid-trading range ahead of policy signals from Fed

11 Jan 2022

The U.S. Dollar remained close to the middle of its recent range on Tuesday against major rivals, as all eyes are on Federal Chair Jerome Powell’s upcoming nomination hearing for indications as to monetary policy timing. 
 
The Dollar index – measuring the greenback against six peers – stood at 95.86 in late Asian trading. At the end of November, it reached over a 16-month high of 96.938 on an increasingly hawkish stance from the Fed, but since then has remained between that point at 95.544, Reuters reports. 

According to TD Securities strategists, it appeared the Fed was adopting a "sooner rather than later" approach in terms of hiking rates: "An affirmation of March tightening and early QT should support USD firmness overall, though within well-established ranges," they said. TD forecasts an initial rate hike in June but added it could be as soon as March. Markets have priced in a May rise with another two by November. 

In addition, 10-year U.S. Treasury yields hit close to a two-year high over 1.8% yet provided only subdued support for the Dollar.  

There was little change for the greenback against the Yen, at 115.26, following Monday’s one-week low of 115.045. The Euro stood at $1.1341, hovering near the middle of its range since the middle of November. 

"The failure of the USD to rally despite a growing relative premium of U.S. bond yields over other G10 economies has many talking about what will need to play out to drive the USD higher," said Chris Weston, Pepperstone head of research. 

He added that the Euro-Dollar direction will be determined by a closing break on either side of the $1.1380 to $1.1270 trading range.

Moreover, the Pound stood at $1.3594 after moving back from the two-month high of $1.36025 on Monday, and the Australian Dollar rose 0.19% to $0.7188.