25 Jan 2023
The Dollar moved up on Wednesday as investors focused on next week's Federal Reserve policy decision, whilst the Euro edged down from close to a nine-month high.
The single currency declined 0.12% against the Dollar at $1.088, not far from the $1.093 level hit on Friday, the highest since the beginning of May.
The Dollar rose 0.1% against the Japanese Yen at 130.28 Yen per Dollar after dropping to an eight-month low of 127.22 last week.
"Much of Asia is still on holiday. We have the Fed coming up very soon, and I think there's a bit of caution ahead of that," according to the head of Asia FX strategy at RBC Capital Markets, Alvin Tan.
A fall in global energy prices and a subsequent inflation slowdown in advanced economies has fuelled rumours the Federal Reserve, and other central banks could soon bring an end to rate hikes, Reuters reports.
These forecasts have led the Dollar index – measuring the currency against six rivals – to fall over 11% from September's two-decade high of 114.78.
On Wednesday, the index rose 0.11% to 102.02, whilst the Sterling edged down 0.23% to $1.231.
Traders anticipate the Fed will hike rates by 25 basis points next Wednesday, less than December's 50-basis point rise. Beforehand, U.S. Q4 economic growth figures will be published on Thursday.
Furthermore, data published on Tuesday revealed eurozone business activity achieved modest growth this month. Sentiment has been boosted and the Euro has been supported by further rate hikes by the European Central Bank.
Whereas in the United States, business activity declined this month for the seventh consecutive month, the downturn was not as severe in the manufacturing and services sectors for the first time since September.
"(The data) just confirms that for one, the resilience in Europe ... and the challenges they've had in terms of energy, have not been as detrimental as some had expected," stated Rodrigo Catril, National Australia Bank currency strategist.
"At the same time, the slowdown in the U.S., in terms of activity, looks to be broadening."