US dollar reaps more gains ahead of Fed

The US dollar rose on Tuesday, trading near a two-decade high, as investors’ focus shifted to expectation of another aggressive rate hike by the Fed amid a week that is full of major bank meetings.

The Fed has already started its two-day meeting on Tuesday, with rate futures traders betting on an 81% chance of a 75 basis point hike and a 19% probability of a 100 bps of tightening.

The dollar index was on track for its fifth weekly gain in six and was last up 0.5% at 110.24. It is not far from 110.79, a level hit earlier this month for the first time since June 2002.

Traders and investors are aware that the dollar is behaving like a force of nature, and unwilling to face its momentum.

This means that unless something influential could slow it down between now and Wednesday, the US dollar is likely to follow Newton’s first law, namely an object in motion will stay in motion until impacted by an external force.