Dec 13 Reuters - The dollar went higher ahead of a series of central bank meetings this week, including the U.S. Federal Reserve, with investors looking for clues on when it will start to raise rates in 2022.
The euro fell as it was perceived as vulnerable to a rate hike in the United States due to expectations that the Fed will tighten policy faster than the dovish European Central Bank.
The dollar index, which measures the dollar against six major peers, was up 0.3% at 96.38. The euro was down 0.4% at $1.1268.
We see moderate hawkish risks into the December FOMC Federal Open Market Committee on Wednesday, as the Fed mainly stays focused on optionality to respond to the possibility of further inflation, Citi analysts said in a note that they are tactically bearish EURUSD into this week. Analysts believe that the dollar's march higher in recent weeks has already factored in many of its potential sources of strength in the short term.
Kamakshya Trivedi, co-head of global FX, rates and EM strategy at Goldman Sachs, said that the next year I don't feel the same degree of dollar bullishness as the consensus estimates.
If we start to see higher commodity prices and decent data from China, the dollar may be on the back foot after a good run. The Norwegian crown was down 0.6% against the U.S. dollar. The Norges Bank, which said it would not buy Norwegian crowns on behalf of the country's government in December, is expected to raise its benchmark interest rate on Thursday.
A hike is not fully priced with Omicron uncertainty taking out some of the pricing, so there is scope for NOK outperformance if Norges bank acts, according to MUFG analysts. The pound fell 0.2% to $1.3245 after British prime minister Boris Johnson said on Sunday that Britain was facing a tidal wave of the Omicron variant.
The Swiss National Bank, which has been battling the appreciation of the franc since the start of the epidemic, is due to make its latest interest rates decision on Thursday and stepped up its intervention against the franc, despite the fact that it was not far from its highest level since June-June 2015 against the euro at 1.0373.
The Turkish lira trimmed some losses as the central bank was selling dollars in the market. It was down 1.7% at 14.12 versus the dollar after hitting an all-time low at 14.99 on concerns about President Tayyip Erdogan's low-interest rate policy and before a rate decision later this week.
The price of the digital currency was up 1.7% at $48,810. After hitting levels above $50,000 on Sunday, 28 hit. The coin that is linked to the ethereum network fell by 3% to $4,011.