US Dollar Maintains Strength Ahead of FOMC Decision

The US dollar is trading strong against its peers ahead of the monetary policy decision by the Fed due later in the day, which could reveal

Written by: Arslan Butt • Wednesday, March 17, 2021 • 1 min read

• Last updated: Thursday, March 18, 2021

Early on Wednesday, the US dollar is trading strong against its peers ahead of the monetary policy decision by the Fed due later in the day, which could reveal the central bank’s future plans. At the time of writing, the US dollar index DXY is trading around 91.95.

While the Fed isn’t expected to hike interest rates or tighten its monetary policy in the latest meeting, traders will keep an eye out for revised growth projections put out by the central bank today. With the COVID-19 vaccine distribution progressing at a rapid pace across the country and President Biden’s latest relief package being rolled out, expectations are for the US economy to recover at a faster than expected pace this year.

There is also considerable interest to see if the Fed will react to the recent volatility in the bond markets that has sent US Treasury yields to the highest levels seen in more than year. Although Fed officials, including Chairman Jerome Powell, have played down the effect of rising treasury yields, any comments about inflation concerns can also cause moves in the US dollar today.

For now, higher US Treasury yields have driven bullishness in the US dollar index for the past three consecutive sessions. The greenback has also strengthened against the Euro over concerns about European countries halting the use of AstraZeneca’s COVID-19 vaccine, which could potentially impede progress towards economic recovery.