Dollar is falling as optimism spreads before the Fed and BoE meetings

The US dollar slipped on Tuesday from a one-week high against a basket of major counterparts, as sentiment improved in financial markets ahead of the Federal Reserve and Bank of England meetings scheduled for this week.

The Federal Reserve is widely expected to raise its key interest rate by 75 basis points on Wednesday, the fourth such increase in a row. However, futures markets are divided over the December meeting, with expectations swinging between a 75 or 50 basis point hike.

In Britain, the Bank of England is also expected to raise interest rates by 75 basis points at its meeting on Thursday, before slowing the rate hike to 50 basis points in December.

The dollar index, which measures the performance of the US currency against six rival currencies, including the euro, the pound sterling and the yen, fell 0.48 percent to 111.02 on Tuesday, losing part of the gains it recorded on Monday, amounting to 0.79 percent.

The British pound rose 0.55 percent to $1.1529, as traders awaited the Bank of England meeting. The rise in sterling comes after falling more than one percent on Monday. The euro also rose 0.47% to $0.9923.

The dollar index has increased by more than 15 percent since the beginning of the year in light of a significant increase by the Federal Reserve in interest rates, which led to significant declines in other currencies and increased pressure on the global economy.

The Australian and New Zealand dollars rose from their lowest levels in a week amid an overall improvement in market sentiment.

However, the Australian dollar pared gains after the Reserve Bank of Australia decided to stick to a slower pace of rate hikes despite the sudden jump in inflation to a 32-year high in the third quarter.

The Australian dollar rose 0.57 percent to $ 0.6434, but fell after the Reserve Bank of Australia’s decision from higher levels recorded earlier. The New Zealand dollar also increased 1.02% to $0.5874.

The dollar fell against the yen 0.71 percent to 147.68.

Japan’s Finance Ministry announced on Monday that it spent a record $42.8 billion to intervene in the currency market this month to prop up the yen after it sank to a 32-year low near 152 on Oct. 21.

The Chinese yuan also fell to near a 15-year low against the dollar on Tuesday, before paring its losses after the central bank set a benchmark at the lower-than-key range of 7.2 for the dollar for the first time since 2008.