Dollar Edges Up

The dollar edged higher on Monday as investors braced themselves for a slew of central bank policy meetings this week, including the US Federal Reserves.

Market participants were eager to learn how quickly the US Federal Reserve will unwind its bond-buying program and when interest rates may begin to rise in 2022.

The euro fell because it is vulnerable to a rate hike in the United States. Meanwhile, the Federal Reserve expects to tighten policy faster than the dovish European Central Bank. The US inflation data released on Friday provided no new clues to investors about whether the Fed will need to be more aggressive to combat rising prices.

The dollar index, which compares the US currency to six major currencies, was up 0.2 percent at 96.28. The euro was trading at $1.1286, down 0.3 percent. The Fed primarily remains focused on optionality to respond to the possibility of continued inflation, Citi analysts wrote. Hence, we see moderate hawkish risks into the December FOMC meeting on Wednesday.

The Norwegian crown was down 0.5 percent in terms of the US dollar. 

Currencies

The pound fell 0.2 percent to $1.3245 after British Prime Minister Boris Johnson said that the country is facing a tidal wave of the Omicron coronavirus variant and that two vaccine doses will not be enough to keep it at bay. The Swiss franc was flat. However, it was still close to its highest level since end-June 2015 versus the euro, at 1.0373.

The Swiss National Bank has been fighting the franc’s appreciation since the pandemic outbreak. It should announce its latest interest rate decision on Thursday.

The Turkish lira fell 4% to 14.44 per dolla. This resulted from it reaching a new all-time low of 14.99 on continued concerns about President Tayyip Erdogan’s low-interest-rate policy.

Despite inflation exceeding 21 percent, Turkey’s central bank expects to cut its policy rate by 100 basis points to 14 percent this week.