SINGAPORE, Dec 8 (Reuters) – The U.S. dollar drifted lower on Monday, ahead of a week crammed with central bank meetings and headlined by the U.S. Federal Reserve, where an interest rate cut is all but priced in although a divided committee makes for a wild card.
Besides Wednesday’s Fed decision, central bank policy meetings are also due in Australia, Brazil, Canada and Switzerland, though no moves are expected outside of the Fed.
The euro, which has been trading in a reasonably tight range since June, inched higher to $1.1663. The yen, which has found a footing after sliding through November, rose slightly to 155.21 per dollar.
Analysts expect a “hawkish cut”, where the language of the statement, median forecasts and Chair Jerome Powell’s press conference point to a higher bar on further rate reduction.
That could support the dollar if it pushes investors to dial back expectations for two or three rate cuts next year, though messaging could be complicated by policymakers’ division as several have already all but indicated their voting intentions.
“We expect to see some dissents, potentially from both hawkish and dovish members,” said BNY’s head of markets macro strategy Bob Savage in a note to clients.
The Federal Open Market Committee has not had three or more dissents at a meeting since 2019, and that has happened just nine times since 1990.
The Australian dollar notched a 2-1/2-month high of $0.4469, having rallied through 200-day and 50-day moving averages in recent weeks as markets have swung away from expecting rate cuts.
The Reserve Bank of Australia meets on Tuesday after a run of hot data on inflation, economic growth and household spending. Futures imply the next move will be up and possibly as soon as May, leaving the focus on the post-meeting statement and media conference.
“We expect the RBA to be on an extended hold, with the cash rate to remain at its current level of 3.60%,” said analysts at ANZ in a note last week, revising previous expectations for a cut.
A similar dynamic in Canada had the loonie surging to a 10-week high on Friday following strong labour data. The Bank of Canada is widely expected to leave its interest rate on hold on Wednesday and a hike is fully priced by December 2026.
The currency was steady at C$1.3819 on Monday.
The New Zealand dollar idled at $0.5784, shy of resistance around $0.58, while the Swiss franc edged 0.1% firmer to 0.8034 per U.S. dollar.
Subdued inflation is seen keeping Switzerland’s policy interest rate at 0% for a while.
Sterling traded a whisker above its 200-day moving average at $1.3339, while China’s yuan was holding at 7.068 a dollar.
A hold is widely expected in Brazil, where the policy rate is at 15%, with a possible nod towards a cut next quarter.
(Reporting by Tom Westbrook; Editing by Christopher Cushing and Stephen Coates)
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