November 17, 2021

Fed uncertainty fuels cautious dollar trades

U.S. hundred dollar bills lie in a stash.

Alena Vikhareva | iStock | Getty Images

The dollar stabilized near multi-week highs on Tuesday as traders turned cautious ahead of the Federal Reserve’s two-day policy meeting, which could potentially provide hints of plans to start tapering its bond purchases.

So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come.

However, recent economic data has raised concerns that price pressure could force an earlier stimulus withdrawal.

“That is exactly what makes tomorrow’s Fed meeting so interesting: market participants simply cannot be certain which aspect will weigh more heavily on the Fed’s mind,” Commerzbank analyst Esther Reichelt wrote in a note to her clients.

Nearly 60% of economists in a Reuters poll expect a…

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