Dollar Down, but Moves Were Small Over an Expected Fed Hike

By Zhang Mengying

Investing.com – The dollar was down on Monday morning in Asia, but moves were small as investors braced for a 75-basis-point interest rate hike by the U.S. Federal Reserve this week.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.05% to 106.68 by 12:57 AM ET (4:57 AM GMT).

The USD/JPY pair edged up 0.12% to 136.21.

The AUD/USD pair jumped 0.23% to 0.6909, and the NZD/USD pair fell 0.26% to 0.6234.

“The Australian dollar will mainly be a function of the world economic outlook,” Commonwealth Bank of Australia’s head of international economics Joe Capurso told Reuters.

“The darkening outlook suggests the Aussie has more downside than upside risk and can test $0.6800 this week.”

The USD/CNY pair inched up 0.07% to 6.7557, while the GBP/USD pair edged down 0.16% to 1.1983. Investors are awaiting progress in a potential restructuring plan for China Evergrande Group (HK:3333) as the world’s most indebted developer has previously said it would deliver a preliminary plan by the end of July.

The U.S. Federal Reserve concludes a two-day meeting on Wednesday and investors are priced in a 75-basis-point (bp) interest rate hike.

“Market reaction will turn on how hawkish Chair (Jerome) Powell sounds with his determination to reduce inflation in the face of slowing growth,” National Australia Bank currency strategist Rodrigo Catril told Reuters.

On the data front, U.S. Gross Domestic Product (GDP) data is due on Thursday.

In cryptocurrencies, Bitcoin hovered at $22,278.