The dollar held a decline from yesterday against 10 major peers, its biggest in three months, as traders weighed whether the Federal Open Market Committee will alter the language in its policy statement today.
Australia’s currency weakened amid doubts a liquidity infusion yesterday by the People’s Bank of China signals a monetary policy shift in the South Pacific nation’s biggest trading partner. New Zealand’s currency fell after Westpac Banking Corp said Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, will cut its milk payment forecast. The pound remained stronger before the release today of minutes from the Bank of England’s last meeting and a referendum on Scottish independence tomorrow.
“Traders are reluctant to buy or sell the dollar until they see the FOMC outcome,” said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. in New York. “The market is on guard as there is no consensus view on how the statement will change.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed at 1,048.07 at 6:51 a.m. in London after falling 0.3 percent yesterday, the most since June 18. It touched 1,052.14 yesterday, matching the highest since July.
Australia’s dollar declined 0.3 percent to 90.69 U.S. cents. The pound was at $1.6281 after rising 0.3 percent yesterday to $1.6277.
The Fed concludes a two-day meeting today as officials consider the timing of interest-rate increases and whether to revamp their public guidance on the path of borrowing costs.
The central bank has said since March that rates would stay low for a period after it completes a bond-buying program under its quantitative easing strategy. Policy makers in July reduced monthly bond purchases to $25 billion in a sixth consecutive $10 billion cut, on track to conclude the program by year-end.
“There’s still a bit of uncertainty about what the Fed could be releasing,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “The trend is for the U.S. dollar to keep strengthening, because even if the Fed doesn’t signal it now, they’re still talking about an exit strategy and they’re looking at raising rates at some point.”
The dollar fell yesterday as Wall Street Journal reporter Jon Hilsenrath said in a Web video that he thinks Fed policy makers will maintain their pledge to keep benchmark overnight rates low for “considerable time” after the bank ends asset purchases.
A measure of foreign-exchange market volatility was near a five-month high. JPMorgan Chase & Co.’s Global FX Volatility Index was at 7.6 percent after closing at 7.65 percent on Sept. 15, the highest level since April 1.
Australia’s currency weakened amid speculation over whether China is taking steps to stimulate economic growth. The People’s Bank of China is providing 500 billion yuan ($81.4 billion) of liquidity to the country’s five biggest banks, Sina.com reported yesterday. The central bank started providing the banks with 100 billion yuan each, the news website said, citing banking analyst Qiu Guanhua at Guotai Junan Securities Co.
“There seems to be a great deal of debate over whether that’s an attempt to stimulate the economy or just liquidity management,” said Sean Callow, a strategist at Westpac in Sydney. Today’s declines in the Aussie “are very much driven by a growing view that there has been no substantive change in Chinese monetary policy,” he said.
New Zealand’s dollar fell against most of its 16 major peers after Westpac said Fonterra will reduce its payment forecast to NZ$5.30 ($4.33) per kilogram from its current estimate of NZ$6 at an expected review next week. The currency dropped 0.2 percent to 81.82 U.S. cents.