Dollar nears multi-week high ahead of US Federal Reserve rate decision

The dollar held on to its recent gains on Wednesday, approaching its highest levels in several weeks against a basket of major currencies, as markets awaited the US Federal Reserve’s interest rate decision.

Traders expect the decision could mark the first in a possible series of rate hikes that would increase borrowing costs.

Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney, said there is about a 90% chance of a 25 basis point rate hike, adding that the dollar could see a slight uptick if the Federal Reserve raises rates.

The dollar rose alongside bond yields in overnight trading, posting its biggest gains against the yen and the New Zealand dollar. This pushed the New Zealand dollar to a two-month low of $0.5749 in early Asian trading, while the yen slipped to a one-week low of 155.43 per dollar.

The euro stood at $1.1535, near its one-month low of $1.1523 reached on Monday, while the British pound was at $1.3470, remaining close to its six-week low of $1.3464 also hit on Monday.

The Australian dollar was steady at $0.7126, as currency markets saw limited volatility amid a synchronized rise in global bond yields over the past few weeks.