© Reuters. FILE PHOTO: A picture illustration shows US 100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao
By Ankur Banerjee
SINGAPORE (Reuters) – The dollar was pinned near five-week lows on Wednesday ahead of the conclusion of the US Federal Reserve’s policy meeting, with investors awaiting clarity on the path the central bank is likely to take in the wake of global banking turmoil.
Investor attention is zeroed in on whether the Fed will stick to its hawkish path to fight sticky inflation or pause interest rate hikes given recent trouble among banks which have included bankruptcy and last-minute rescues.
The , which measures the currency against six peers, was at 103.22, just above the five-week low of 102.99 touched overnight. The euro was at $1.0767, hovering around a five-week high of $1.0789 scaled overnight.
Markets are now pricing in about a 14% chance of the Fed not increasing rates, with a roughly 86% chance of a 25 basis point hike, showed the CME FedWatch tool. Just a month earlier, the market was pricing in a 24% chance of a 50 basis point hike.
Investor sentiment remained fragile with worries over the outlook for the banking sector starting to ease after sharp volatility in the market in the past few weeks following high-profile US banking failures earlier in the month and the rescue of lender Credit Suisse Group AG at the weekend. .
“Markets are seemingly becoming more comfortable with the idea that authorities have probably done enough to prevent a systemic banking crisis,” said Rodrigo Catril, a senior currency strategist at National Australia Bank (OTC:) in Sydney.
“It might be early days, but the price action over the past 48 hours is certainly signaling a change in mood by investors.”
The Fed meeting concludes on Wednesday with the 2 pm EDT (1800 GMT) release of a policy statement followed half an hour later by a news conference by Chair Jerome Powell.
Catril said the Fed faces a difficult choice given a strong labor market alongside February inflation figures that were higher than many market watchers expected. Such circumstances would usually be ripe for a return to a 50 basis point hike were it not for worries over financial stability, he said.
Meanwhile, the yen weakened 0.04% to 132.59 a dollar, while sterling was last trading at $1.2221, up 0.06% on the day.
The Australian dollar rose 0.04% to $0.667, while the New Zealand dollar fell 0.16% to $0.618.
In cryptocurrencies, bitcoin last fell 0.14% to $28,114.13, below a nine-month peak it touched on Monday. last fell 0.47% to $1,793.72.
Currency quote prices at 0111 GMT
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0770 $1.0770 +0.00% +0.00% +1.0776 +1.0766
Dollar/Yen 132.4150 132.4900 +0.12% +0.00% +132.6850 +132.6500
Euro/Yen 142.63 142.67 -0.03% +0.00% +142.8700 +142.4500
Dollar/Swiss 0.9220 0.9223 +0.01% +0.00% +0.9224 +0.9215
Sterling/Dollar 1.2220 1.2219 +0.01% +0.00% +1.2227 +1.2213
Dollar/Canadian 1.3707 1.3713 -0.01% +0.00% +1.3718 +1.3710
Aussie/Dollar 0.6679 0.6671 +0.12% +0.00% +0.6679 +0.6662
NZ 0.6189 0.6194 -0.11% +0.00% +0.6195 +0.6173
Tokyo Forex market info from BOJ