TOKYO: The US dollar hovered near its strongest level since early April against the euro on Monday, as financial markets looked ahead to the Federal Open Market Committee (FOMC) meeting this week for clues on the timing of stimulus tapering.
The greenback was also close to a 12-day high on the safe-haven yen as record-high U.S. equity markets buoyed risk sentiment, report agencies.
Commonwealth Bank of Australia projects the dollar can continue to strengthen this week on the possibility of the Fed moving a step closer to tapering at the conclusion of its two-day policy meeting on Wednesday.
“We expect the FOMC to drop ‘substantial’ from ‘substantial further progress’” in its guidance on the necessary conditions for the labour market before removing monetary support, CBA strategist Joseph Capurso wrote in a client note.
“Removing ‘substantial’ will signal the FOMC believes it will soon be appropriate to taper asset purchases,” setting up a possible announcement of a taper in September, he said. The risk to such an outlook is the rise in COVID-19 cases in the United States, coming after the Fed at its last meeting on June 16 dropped a reference to the coronavirus as a drag on the economy.
The dollar index eked out a 0.2% gain last week, benefiting from a safe-haven bid on fears a surge in infections of the fast-spreading Delta variant could derail the global recovery, but paring those gains as strong U.S. earnings lifted stocks.
The dollar last traded little changed from Friday at $1.17655 per euro, near the high from last week of $1.1752, a level not seen since April 5.