# Dollar slips before expected Fed rate hike
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-04
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Fed Meeting Outcome: Dollar Falls Against Other Currencies
Meta Description: The dollar fell as investors assessed potential rate hikes and balance sheet reduction. Chair Powell's announcement and post-meeting signals will be
URL: https://financedigest.com/dollar-slips-before-expected-fed-rate-hikehtml

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By Karen Brettell

NEW YORK (Reuters) – The dollar fell against a basket of currencies on Wednesday ahead of the outcome of a Federal Reserve meeting, as investors evaluated how much expected U.S. [central bank](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") hawkishness is already priced into the greenback.

The Fed is expected to hike rates by 50 basis points, which would be the largest increase in two decades, and announce plans to reduce its $9 trillion balance sheet as it tackles [inflation rising](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") at the fastest pace in 40 years.

Comments by [Fed Chairman Jerome Powell at the conclusion of the meeting will be scrutinized for signals](https://www.financedigest.com/dollar-slides-from-near-two-year-high-amid-hawkish-signals-from-fed.html "Dollar slides from near two-year high amid hawkish signals from Fed") on how the U.S. [central bank](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") will balance the need to stem rising price pressures against weakening growth if the economy stutters.

Chair Powell’s post-decision [press conference](https://www.financedigest.com/5-top-tips-when-holding-a-crisis-press-conference.html "5 Top Tips When Holding a Crisis Press Conference") will be key. If he shows any hints of dovishness, [markets will take yields and the dollar](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") lower,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a report.

That said, we see no reason for Powell to hedge his bets right now and so we expect full speed [ahead from the Fed,”](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") he added.

The [dollar index](https://www.financedigest.com/dollar-index-jumps-after-u-s-retail-sales-show-surprise-rebound.html "Dollar index jumps after U.S. retail sales show surprise rebound") was last at 103.24, down 0.16% on the day. It reached 103.93 on Thursday, the [highest since](https://www.financedigest.com/average-annual-uk-grocery-bill-highest-since-at-least-2008-industry-data.html "Average annual UK grocery bill highest since at least 2008 -industry data") Dec. 2002.

[Fed funds futures traders are pricing for the Fed’s benchmark rate](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") to increase to 2.96% by year-end, from 0.33% now.

The Fed is [expected to take a more hawkish](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") approach to monetary policy than its peers, with Europe struggling from weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.

The EU proposed its toughest [sanctions yet against Russia](https://www.financedigest.com/russia-unleashes-rockets-after-mariupol-ceasefire-eu-eyes-oil-sanctions.html "Russia unleashes rockets after Mariupol ceasefire, EU eyes oil sanctions") on Wednesday, including a phased oil embargo.

The euro rose to $1.0551, up 0.30%, after dropping to $1.0470 on Thursday, the [lowest since](https://www.financedigest.com/britains-cost-of-living-crisis-sends-sterling-to-lowest-since-mid-july.html "Britain’s cost of living crisis sends sterling to lowest since mid-July") January 2017.

The U.S. dollar has also benefited from safe-haven flows as COVID-19 restrictions in China trigger [concerns about global growth and new supply](https://www.financedigest.com/oil-gains-as-russian-supply-cuts-temper-concerns-over-rate-hikes-high-stocks.html "Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks") chain disruptions.

Beijing [shut scores of metro stations and bus routes and extended COVID-19 curbs on many public](https://www.financedigest.com/ireland-to-turn-heat-down-in-public-buildings-shut-empty-office-floors.html "Ireland to turn heat down in public buildings, shut empty office floors") venues on Wednesday, focusing efforts to avoid the fate of Shanghai, where millions have been under strict lockdown for more than a month.

The Aussie dollar outperformed for the second day, after the Reserve Bank of Australia on Tuesday [raised its cash rate](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") by a surprisingly large 25 basis points to 0.35%, the first hike in over a decade, and flagged more to come as it pulls down the curtain on its massive pandemic stimulus.

The Aussie gained 0.63% to $0.7141.

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[Currency bid](https://www.financedigest.com/evergrande-jitters-pull-risk-currencies-lower-dollar-gains-on-safety-bid.html "Evergrande jitters pull risk currencies lower, dollar gains on safety bid") prices at 9:32AM (1332 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.2400 103.4400 -0.16% 7.921% +103.6000 +103.1700

Euro/Dollar $1.0551 $1.0519 +0.30% -7.20% +$1.0556 +$1.0507

Dollar/Yen 129.9400 130.1300 -0.17% +12.85% +130.2000 +129.8000

Euro/Yen 137.11 136.92 +0.14% +5.21% +137.1200 +136.7200

Dollar/Swiss 0.9816 0.9788 +0.29% +7.62% +0.9819 +0.9784

Sterling/Dollar $1.2516 $1.2496 +0.16% -7.45% +$1.2537 +$1.2469

Dollar/Canadian 1.2823 1.2842 -0.14% +1.42% +1.2842 +1.2805

Aussie/Dollar $0.7141 $0.7096 +0.63% -1.77% +$0.7151 +$0.7089

Euro/Swiss 1.0355 1.0295 +0.58% -0.14% +1.0356 +1.0285

Euro/Sterling 0.8428 0.8418 +0.12% +0.33% +0.8433 +0.8404

NZ $0.6446 $0.6436 +0.19% -5.79% +$0.6462 +$0.6423

Dollar/Dollar

Dollar/Norway 9.3810 9.4000 -0.37% +6.31% +9.4265 +9.3650

Euro/Norway 9.8988 9.8823 +0.17% -1.14% +9.9179 +9.8673

Dollar/Sweden 9.8539 9.8606 +0.19% +9.27% +9.9010 +9.8453

Euro/Sweden 10.3979 10.3779 +0.19% +1.60% +10.4093 +10.3750

(Additional reporting by Sujata Rao in London; Editing by Hugh Lawson)


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