The dollar rose against the euro but was flat against the yen Tuesday as markets looked ahead to what the Federal Reserve says about a rate hike after a two-day policy meeting.
Few expect the Fed to undertake its first rate increase in nine years when the meeting wraps up Wednesday afternoon with a statement and press conference by Chair Janet Yellen.
But it could signal how confident or not it is in the US economy’s rebound since the first quarter contraction, and whether it is prepared to launch into an expected series of rate increases as early as September, as many economists now expect. “While the Fed is not expected to begin raising rates tomorrow, it is possible, and we expect a few FOMC members will make the case, especially after two solid employment increases and evidence of accelerating wage growth,” said Chris Low of FTN Financial. “In the end, however, the Fed is likely to continue to make the case for a hike later this year.”
The euro held up despite a rising sense of crisis as Greece lashed out at its bailout lenders and showed no sign of compromise that would bring it new funding and avoid being forced to default on its debt. In a striking sign of how bad the situation had become, US Treasury Secretary Jacob Lew called Greek Prime Minister Alexis Tsipras and told him that Athens should make “a serious move to reach a pragmatic compromise with its creditors.” Failing to agree new financing “would create immediate hardship for Greece and broad uncertainties for Europe and the global economy,” Lew told Tsipras, according to the Treasury. –AFP