Dollar Down in Run-Up to Fed Policy Decision
The U.S. dollar was on track to fall for a second straight session as traders looked ahead to Wednesday’s Federal Reserve policy decision. The Australian dollar strengthened after the country’s central bank raised its cash rate in a narrowly split vote, underscoring how sensitive markets remain to inflation and rate signals amid the Iran war’s energy shock.
The Bloomberg Dollar Spot Index was down about 0.2%. The Fed began its two-day policy meeting on Tuesday and is widely expected to keep rates unchanged, with investors focused on guidance as energy-driven inflation risks remain elevated.
On the geopolitical front, President Donald Trump criticized NATO allies in a Tuesday morning social media post for refusing his requests to provide military support to help clear the Strait of Hormuz during the war against Iran. The economic impact of the conflict is increasingly visible: U.S. diesel climbed above $5 a gallon for the first time since December 2022 as supply disruptions persist, and Iran reportedly set a massive natural gas field in the United Arab Emirates ablaze.
Marc Chandler, chief market strategist at Bannockburn Global, said the decision by many NATO allies to reject Trump’s request to help escort tankers through Hormuz “may be giving rise to a bit of similar reaction as the threats on Greenland” that previously weighed on the greenback.
In rates, the U.S. 10-year Treasury yield slipped about 2 basis points to around 4.20%, adding to the dollar’s pullback.
In G-10 FX, AUD/USD climbed about 0.5% to 0.7103, after touching 0.7118 in New York morning trading. The move followed the RBA’s cash-rate hike, with Governor Michele Bullock saying the board agreed inflation remains too high, even though the committee’s vote was a tight 5–4 in favor of hiking.
USD/JPY was little changed near 159.04. Japan’s finance minister said recent currency moves are not in line with fundamentals, reiterating warnings that authorities could act to counter excessive moves. Separately, BOJ Governor Kazuo Ueda reiterated that the central bank will conduct bond operations flexibly in exceptional cases when yields rise sharply.
Elsewhere, EUR/USD rose about 0.3% to 1.154, and GBP/USD was up about 0.3% to 1.3357. USD/CAD edged 0.1% higher to 1.3696 ahead of Wednesday’s Bank of Canada meeting, while USD/NOK fell about 0.9% to 9.5837.
Source : Newsmaker.id
