The dollar was pinned near five-week lows ahead of the conclusion of the U.S. Federal Reserve’s policy meeting, with investors awaiting clarity on the path the central bank is likely to take in the wake of global banking turmoil. | Reuters
Investor sentiment remained fragile with worries over the outlook for the banking sector starting to ease after sharp volatility in the market in the past few weeks following high-profile U.S. banking failures earlier in the month and the rescue of lender Credit Suisse Group AG at the weekend.
“It might be early days, but the price action over the past 48 hours is certainly signalling a change in mood by investors.” Catril said the Fed faces a difficult choice given a strong labor market alongside February inflation figures that were higher than many market watchers expected. Such circumstances would usually be ripe for a return to a 50 basis point hike were it not for worries over financial stability, he said.
“Ideally, we would like the Fed to go with a 25 basis point hike this meeting, tone down hawkish guidance and emphasize that policy decisions at subsequent meetings will continue to be data-dependent,” Wong said. “This wish list should see dollar trade on the softer profile and risk proxies trade steadily.”Meanwhile, the yen strengthened 0.04 percent to 132.47 per dollar, whereas sterling was last trading at $1.2233, up 0.16 percent on the day.
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