Dollar edges down as all eyes fix on Fed

The dollar edged down against a basket of major currencies today, as investors bet the US Federal Reserve would decline to raise interest rates for the first time since 2006 when it finishes a two-day meeting later in the day. A rate hike at this month's meeting has been virtually ruled out by markets, although a minority of investors still expect the Fed to indicate interest rates could rise in December in a statement released at 1800 GMT (2pm, Malaysian time). If it does so, Commerzbank's head of FX research in Frankfurt, Ulrich Leuchtmann, reckons the dollar would appreciate. "If they say nothing, the market will not react," he said. "If they indicate a December hike, which I don't think is very likely but which might happen, then we'll see dollar strength." Ahead of the statement the greenback edged down 0.1% against its basket to 96.774. The euro inched up to US$1.10650 (RM4.7), still close to a 2-1/2-month low of US$1.0989 hit last week after the European Central Bank signalled it would expand its stimulus programme in December. The Swedish crown recovered from an initial dip after Sweden's central bank expanded its asset purchase programme but declined to add a fourth interest rate cut to this year's tally, trading up 0.6% at 9.3390 crowns per euro. Commerzbank's Leuchtmann said that although the crown had not fallen, because some had expected a rate cut, central banks were involved in a "depreciation race". The Norwegian crown fell as much as 1% today to hit a four-week low of 9.4220 crowns per euro after worse-than expected Norwegian retail sales and labour market data, and as expectations increased that Norway's central bank would cut interest rates at its meeting next week in response to the Riksbank's move. BMO Capital Markets currency strategist Stephen Gallo, in London, said the Riksbank move was largely a reaction to the ECB's signal last week of more action in December. "If they have to act again in December following the ECB's next meeting they probably will," he said. Australia's dollar also fell 1% to a three-week low of US$0.7112, following surprisingly subdued inflation data which increased the likelihood of further rate cuts there. – October 28, 2015. See more at: http://www.themalaysianinsider.com/business/article/dollar-edges-down-as-all-eyes-fix-on-fed#sthash.fKQ42pyV.dpuf