MW: Dollar gains, but traders warn of weakness after interest-rate decision
The dollar was higher against the yen and euro early Wednesday, as investors await the Federal Reserve’s decision on whether it would raise interest rates for the first time since 2006.
The U.S. currency USDJPY, +0.14% was at ÂĄ122.00, compared with ÂĄ121.70 late Tuesday in New York. The buck was modestly stronger against the euro EURUSD, -0.0915% , which was down about 0.1% to $1.0918.
Investors are looking to the Fed’s policy statement and news conference for hints on the pace and timing of rate increases.
Read: How to tell if the Fed statement is dovish or just cautious
“Ahead of the last big event of this year, investors remain nervous and increasingly develop a wait-and-see attitude,” said Yuzo Sakai, manager of foreign-exchange business promotion at Tokyo Forex & Ueda Harlow.
An uptick in Tokyo stocks helped lift sentiment, boosting the dollar against the yen. But the dollar was seen as acting top heavy in the vicinity of the ÂĄ122.00 mark because of profit-taking before the key event.
“We see the dollar’s upside momentum is taking a breather before the event,” said Sakai.
Check out: How currencies might react to these 3 Fed scenarios
The benchmark Nikkei Stock Average NIK, +2.61% closed sharply higher after global stocks gained solidly, recouping much of the losses from earlier this week.
“It all depends on how the U.S. stocks and bond yields will perform after the event. But I have an image that profit-taking will kick in because there would be no more of the material that was moving the market,” said Sakai.
The dollar may fall after the Fed decision later Wednesday, due to possible trading along the lines of “buy the rumor, sell the fact,” said JP Morgan in its morning note. Given still huge outstanding dollar-long positions by speculative players, “it’s very likely that downside pressure on the dollar will likely intensify,” if the Fed meeting’s outcome were in line with the market consensus.
The ICE U.S. Dollar Index DXY, +0.13% , a measure of the dollar against a basket of major currencies, was up 0.02% to 98.24.
