Market News

Summary

• Dollar: Expected to receive a modest boost if the Federal Reserve raises interest rates.
• Yen: The Fed decision could have a significant impact on the yen's recent rally.
• BOJ: Traders are pricing roughly an 80% chance of a rate hike on Friday.

LONDON, Sept. 16 (Reuters)

The dollar held steady near multi-week highs on Wednesday as investors awaited the Federal Reserve's interest-rate decision, which traders expect could mark the beginning of a series of U.S. rate increases.

The dollar has strengthened this week alongside higher bond yields and energy prices, with its largest gains coming against the Japanese yen and New Zealand dollar.

During Asian trading, the yen weakened to a one-week low of 155.49 per dollar.

Fed Expected to Raise Rates

Markets are heavily pricing in a 25-basis-point Federal Reserve rate increase, which would take the benchmark rate to a 3.75%–4.00% range.

Investors will be paying particular attention to the Fed's guidance on whether further rate increases are likely.

“Even though a hike is close to being fully priced, we could see some dollar strength (if they raise interest rates),” said Kirstine Kundby-Nielsen, senior FX analyst at Danske Bank.

Because the rate increase is already largely reflected in market prices, the Fed's forward guidance could be more important than the actual 25-basis-point move.

Dollar and Major Currencies

The euro was trading at $1.1536, remaining close to Monday's one-month low of $1.1523.

Sterling stood at $1.3470 after UK inflation accelerated to a five-month high in August. The data came one day before the Bank of England is expected to leave interest rates unchanged.

The dollar index, which measures the U.S. currency against a basket of major currencies, was little changed at 99.67.