NEWS / Foreign Exchange

The dollar rose against other major currencies on Monday

Overview

The dollar rose against other major currencies on Monday, rebounding from last week's losses as investors await an interest-rate decision from the Federal Reserve later in the week.

The Federal Open Market Committee, the Fed's policy-setting panel, starts its two-day policy meeting on Tuesday. Economists believe the Fed will almost certainly keep monetary policy on hold for the sixth consecutive meeting, maintaining its federal funds rate target at 5.25%. The Fed will announce its decision at 2:15 p.m. Eastern on Wednesday.

Speculation that the Bank of Japan on Tuesday will leave rates unchanged and signal future rate hikes will remain gradual encouraged traders to reestablish carry trade positions -- in which speculators borrow the yen at low costs and reinvest in high-return currencies.

The highlight so far today has been the move by the AUD/USD to above .8000, a 3 year high, on talk of another rate rise in the next month or so. The move above .8000 has also knocked out an options barrier, and set-up the Aussie for a move to .8080 in coming days, with an outside chance of a move up to around .8200 as the herd mentality sets in. Given that the next RBA meeting is not till 3-4 April, we expect the A$ will remain well supported going into this meeting.

Data for today

US: FOMC

UK: CPI

EU: Retail Sales

For today:

Buy USD/JPY around 117.65, with stops under 117.30