Dollar near one-week high on expected Fed meeting

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Dollar near one-week high on expected Fed meeting

TOKYO, December 14, Reuters -- The dollar traded near a one-week high against a basket of major rivals on Tuesday, supported by expectations of a hawkish Federal Reserve meeting this week and hasn demand amid uncertainty about the Omicron coronavirus variant.

The dollar index, which measures the currency against six peers, was little changed at 96.416, after touching 96.450 on Monday for the first time since December 7.

The Fed's two-day meeting that begins later Tuesday headlines a series of central banks that announced policy decisions this week, including the Bank of England and the European Central Bank on Thursday, and the Bank of Japan on Friday.

The US central bank is expected to announce it will wrap up its bond buying stimulus sooner than previously communicated, potentially setting up earlier interest rate increases next year.

Money markets price good odds of a rate hike by June, with another as early as November.

That leaves a very high bar for the Fed to deliver a hawkish surprise, wrote Westpac strategists in a client note.

Even if the Fed matches expectations, they are still ahead of the European Central Bank, who is looking for ways to maintain accommodation after its Pandemic Emergency Purchase Programme, PEPP is due to end in March.

The move of the dollar index has slowed recently, but pullbacks into the mid-95 level are a buy, according to the strategists.

A poll of ECB-watchers found that the ECB would halve the amount of assets it buys each month from April.

The euro was about flat at $1.12835 after touching a one-week low of $1.12605 overnight.

The pound dropped to $1.3210 for the past week, near the one-year low of $1.31615 reached last week.

Britain has reported the first publicly confirmed death of Omicrons in the world, Prime Minister Boris Johnson said on Monday, a day after he warned of a tidal wave of infections from the new variant.

British scientists said that two doses of current COVID 19 vaccines do not induce enough neutralizing antibodies against Omicron.

China has detected its first case of Omicron infection, state media said Monday.

The dollar was trading close to the end of the trading range this month, as it changed hands at 113.545 yen, another safe haven.

The risk-sensitive Australian dollar sank 0.2% to $0.71215, edging back toward Monday's one-week low of $0.7111.

The digital token plunged below $42,000 for the first time since September, lifting the low of $45,750, a level not seen since December 4, as the leading criptocurrency rose by 1% to $47,211.