CURRENCY PAIRS –The dollar gained on Wednesday on safe-haven appeal after reports of further tensions in the US-China trade negotiations. However, gains were capped as investors awaited the Federal Reserve for its policy meeting later in the day.
The supposedly negative impact of the Fed’s pausing of interest rate hikes on the dollar has been offset by the cautious European Central Bank that is currently struggling with the eurozone economy.
The Fed is scheduled to make its rate announcement later in the day. it is also seen to be keeping its benchmark overnight interest rate unchanged.
Following the weaker-than-expected manufacturing data last Friday, investors are betting more on the probability of a cut on the interest rate.
In spite of the gloomy mood, the dollar managed to perk up against the Australian dollar, the Canadian dollar, and the Japanese yen.
The gains were due to the dollar’s status as a safe-haven asset. Jitters were blamed for a report on Tuesday that claimed some US officials expressed concerns that China was pushing back against US demands in the negotiations.
The Australian dollar fell a quarter of a percent to $0.7070. It is used as a proxy for China’s risks because of Australia’s dependence on Chinese demand for its exports.
Measured against a basket of six other major currencies, the greenback was 0.1 percent higher at 96.454 after reaching its lowest level since March 1 at 96.291 during overnight trading.
Many other currencies stayed within familiar trading ranges before the Fed decision. According to analysts, the dollar might not fall significantly on the Fed meeting since investors have already priced in the possible scaling back of its interest rate outlook.
“The markets look to be very much positioned in expecting a benign FOMC outcome confirming a continued pause,” said a European market research head.
The euro was a bit lower than the dollar at $1.1344.