US dollar holds firm ahead of US Fed statement

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Published: July 29, 2015 9:05:45 AM

The US dollar held on to its modest overnight gains in early Wednesday trade as traders look to any hints from the U.S. Federal Reserve on the timing and the pace of its future rate hikes.

The US dollar held on to its modest overnight gains in early Wednesday trade as traders look to any hints from the U.S. Federal Reserve on the timing and the pace of its future rate hikes.

Ahead of the Fed’s policy statement due at 1800 GMT, trading could be swayed by various month-end related flows, with Wednesday being the last trading day for settlement before month-end, traders said.

The dollar index stood at 96.651 , having rebounded from a two-week low of 96.288 hit on Monday. The euro stepped back to from Monday’s high of $1.11295 to fetch $1.1065 .

The dollar held firm at 123.57 yen, above its low so far this week of 123.01 yen.

“We expect the Fed to refrain from a clear indication on the timing of the Fed’s rate hike. We still expect a hike in September,” said Tohru Sasaki, the head of forex research at JPMorgan Chase Bank.

Sasaki also said the dollar/yen is unlikely to move much if the Fed does steer clear of dropping clear hints on its rate hikes, noting that dollar/yen has not shown any big reaction to the Fed’ policy statement this year.

Worries that the Fed’s draining of cheap funding has been weighing on commodities and emerging market assets that had benefited from the Fed money-printing.

Many commodity currencies remained under pressure from worries about slowdown in the Chinese economy as well, though they bounced back from multi-year lows thanks in part to hopes Chinese shares are stabilising after their massive fall on Monday.

The Australian dollar traded at $0.7339, recovering from six-year low of $0.7257 hit on Tuesday.

The Canadian dollar stood at C$1.2928 to the U.S dollar , off its 11-year low hit on Monday of C$1.3103.

The New Zealand dollar, worst-performing of the major currencies so far this year, gained 0.3 percent in local trade after comments from the Reserve Bank of New Zealand were perceived to contain no new surprises.

RBNZ Governor Graeme Wheeler said the economy needed  further rate cuts and a lower exchange rate.

The kiwi rose to as high as $0.6739, its two-week high, following his comments. It hit a six-year low of $0.6498 earlier this month, having fallen 16.7 percent from the end of last year.

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