Dollar remains stable ahead of US Fed meeting

The US dollar remained stable on September 20, trading below a 20-year high against other major currencies. Investors are waiting for the Federal Reserve (Fed) to continue aggressively raising interest rates to ease inflation at this week’s meeting, Report informs.

The index, which reflects the value of the US currency against six other major currencies, has changed little and is at 109.53. It hit 110.79 earlier this month, the highest since June 2002.

Highly susceptible to monetary policy expectations, the two-year US Treasury yield reached 3.970% for the first time since November 2007. The 10-year yield rose to 3.518%, the highest since April 2011.

Market quotes fully take into account the likelihood that on September 21, the Fed will raise its key rate by 75 basis points. The probability of a 100-basis point rate hike is estimated at 19%. While that estimate is still high, it’s lower than on September 14, when investors, shocked by an unexpected pickup in US consumer prices in August, estimated a 38% chance of a 100-basis point rate hike.

The dollar/Japanese pair yen fell 0.15% to 142.96, continuing to consolidate after two attempts this month to break the 145 level. As a result, on September 7, the pair managed to reach 144.99 for the first time in 24 years. The dollar/yen pair tends to react to changes in the difference between the yields of long-term bonds of the US and Japanese governments.

The euro/dollar pair traded on September 20 without significant changes, at 1.0030. Over the past week, it has been gradually moving higher, consolidating its positions above the parity level, after falling to 0.9864 on September 6 for the first time in two decades.