Dollar Approached 20 Year Highs

The dollar held just below a 20-year high against a basket of currencies on Monday before the Federal Reserve is expected to raise interest rates this week as traders focus on the possibility of a central bank. The United States government took a more hawkish tone than many expected.

The Fed has taken an increasingly aggressive approach to monetary policy to tackle inflation which is rising at its fastest pace in 40 years. It is expected to raise interest rates by 50 basis points and announce plans to trim its balance sheet by $9 trillion.

While the odds are considered low, some investors are watching for the possibility of a 75 basis point increase or a faster rate of balance sheet decline than currently expected.

The dollar rose 0.6% against the Chinese yuan in overseas markets, reaching 6.6820, just below  6.6940 on Friday, its highest level since November 2020.

The Japanese yen held a 20-year low against the dollar on Thursday as the Bank of Japan reinforced its pledge to keep interest rates extremely low by pledging to buy unlimited amounts of bonds.