Investing.com – The dollar fell against its rivals Wednesday as focus shifted from the U.S. midterm election results to monetary policy and the Federal Reserve got its two-day meeting underway.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.28% to 95.85.
The Federal Open Market Committee is expected to stand pat on interest rates Thursday, but market participants will likely scrutinize the monetary policy report for further clues on a December rate hike and any dovishness from central bankers following a rout in stock markets last month.
“After the third rate hike of the year in September, the November FOMC meeting is set to be uneventful and be used to set the stage for a fourth hike in December,” said Kjetil Olsen, Research Analyst at Nordea Markets.
“We don’t think the decline in the stock market we have seen so far is anywhere close to make the Fed change course.”
Nearly 80% of traders expect the Federal Reserve to raise rates in December, according to Investing.com’s Fed Rate Monitor Tool.
The dollar has posted a monthly gain in the past five years, but has run out of steam and could enter bear-market territory in the wake of the Democrats’ sweeping victory to claim the House, Morgan Stanley warned.
“A break away from the dollar-bullish seasonal pattern in November adds weight to our view that the dollar has topped out, entering a long-term bear market,” the bank said.
GBP/USD rose 0.35% to $1.3145 but analysts warned that the pairing has limited room for upside until a Brexit-deal was ratified by members of the U.K. Parliament.
If a deal is announced “with the vast majority of [U.K.] cabinet supporting a deal,” then this could lead to a “much larger” sterling reaction, MUFG said.
EUR/USD rose 0.24% to $1.1455, while USD/JPY fell 0.04% to $113.40
USD/CAD, meanwhile, rose 0.15% to C$1.3105 as oil prices slumped on the back of downbeat petroleum inventory report showing a larger-than-expected build in crude supplies.