Global stock markets remained jittery and the dollar held steady on expectations that the Federal Reserve will maintain its aggressive course of raising interest rates to contain uncomfortably high inflation.
The dollar index, which measures the currency against six pairs, rose 0.164% to trade near a 20-year high of 110.79 hit on September 7.
With last week’s data showing a broad-based rise in core consumer prices in the US, markets are eyeing the possibility of a 100 basis point rate hike when the Federal Reserve concludes its two-day meeting on Wednesday. Markets are pricing a rise of 75 basis points with a probability of 20% at 100 basis points.
This week is full of holidays that can reduce liquidity and lead to more pronounced price movements, with markets in Japan and the UK closed on Monday, Australia on Thursday and Japan again on Friday, among others.
The euro fell 0.05% to $1.001. The dollar rose about 0.24% at 144.99 yen, hovering near the strong resistance level at 145 which was boosted by strong comments from the Japanese monetary authorities regarding currency intervention.
The Bank of Japan is expected to maintain its massive stimulus at its meeting on Wednesday and Thursday, continuing its ultra-easy monetary policy. But a turning point may come sooner than expected, as the central bank recently dropped the word “temporary” from its description of high inflation.