Dollar One Day Before a U.S. Federal Reserve Meeting

The U.S. dollar held firm on June 14 after posting its biggest weekly rise in several weeks as traders cut their bearish bets before a Federal Reserve meeting. The outcome of the meeting might signal a change in the outlook for the U.S. monetary policy.

The Fed begins a two-day policy meeting on June 15. Many economists said a much-anticipated taper announcement will come in the next quarter, in spite of a patchy recovery in the labor market.

The inflation data raised concerns that price pressures following the post-Covid economic reopening could force policymakers into an earlier tapering of currency-depreciating stimulus.

Currency markets settled in tight ranges with suggested volatility dropping to multi-year lows after last week’s strong inflation readings. The European Central Bank (ECB) meeting also failed to dislodge currencies from recent trading levels.

Dollar, main currencies, and the Fed

The U.S. dollar gained in recent weeks even as yields on benchmark 10-year U.S. Treasury notes dropped to more than three-month lows of 1.42% on Friday.

Against a basket of its rivals, the dollar edged higher to 90.5. The greenback rose as much as 0.4% last week, it was the dollar’s biggest weekly rise since early May.

The greenback’s gains were aided by some unwinding of short dollar bets. In the week ended June 8, speculators ratcheted up net short positions to the highest in several months.

The British pound suffered losses against the dollar as well as the euro. The pound dropped as much as 0.2% in early London trading.

In cryptocurrencies, bitcoin traded above $39,000 after getting an almost 10% lift on June 13. Its price rose thanks to Elon Musk’s tweet. Musk’s comments on social media affected the price of bitcoin and dogecoin in the past. He tweeted that Tesla will allow bitcoin transactions again when miners who verify transactions use more renewable energy.