The dollar approached the strongest level since March as traders awaited the Federal Reserve’s announcement on monetary policy.
Concern that Fed Chair Janet Yellen won’t provide definitive guidance on the timing of a U.S. interest-rate increase limited the currency this week to its tightest range in almost a year. The central bank concludes its two-day policy meeting and is expected to release a statement at about 2 p.m. New York time.
“The Fed announcement will be pretty neutral,” said Charles St-Arnaud, senior economist at Nomura Holdings Inc. in London. “They won’t want to close the door on a hike in September, and will tell us they’re data-dependent.”
Bloomberg’s Dollar Spot Index, which measures the U.S. currency against 10 major peers, was little changed at 1,204.07 as of 11:48 a.m. New York time. Its range is the narrowest on a weekly basis since August. The gauge climbed to 1,212.78 on July 24, the highest level since March.
Traders are pricing in a 40 percent probability that the Fed raises rates at or before the September meeting, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.
Options to buy the U.S. currency have tracked economic statistics in July: They slid to an almost 11-month low last week, exacerbated by a surprise drop in retail sales, before recovering following the fewest initial jobless claims since 1973.
Yellen has repeated since March that she expects to raise rates sometime this year, even as she continued to stress the decision will depend on economic data.
Citigroup Inc.’s Economic Surprise Index for the U.S. rose to the highest since January last week, showing confidence is improving.
“There’s greater confidence at this point that we’re in the midst of a renewed pickup” in the U.S. economy, said Todd Elmer, a Singapore-based strategist at Citigroup, who expects the first rate increase in September and another in the first quarter of next year.