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Currency Markets Shuffle Ahead of Fed Vote

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Currency Markets Shuffle Ahead of Fed Vote

The forex markets were active to start the week, as currency traders placed their bets ahead of Tuesday’s Federal Open Market Committee policy meetings.

Policymakers at the US Federal Reserve have been scrutinizing the economic data to determine whether January is the right time to pare back record stimulus for the second time in as many months. The Fed tapered asset purchases by $10 billion at the December 18-9 meetings. Since November 2008, the US central bank has eased around $4 trillion into the financial markets, helping to fuel a five-year bull market.

On Tuesday, the discussions will shift from employment to inflation, as policymakers look to determine whether the economy is generating enough inflation to meet the Fed’s 2 percent target. Consumer inflation rose at an annualized rate of 1.5 percent in December, a six-month high. The Fed’s decision whether or not to taper asset purchases will likely depend on when policymakers believe inflation will reach its target.

The US dollar index, which is used to gauge the relative strength of the dollar against six of its major competitors, consolidated around 80.5. The greenback faced steep losses versus the British pound and Australian dollar, but rebounded sharply versus the Japanese yen and Canadian dollar.

Below is a recap of the major US dollar peers in the late North American session:

GBP/USD: 1.6586 (+0.65 percent)
EUR/USD: 1.3674 (-0.05 percent)
USD/JPY (+0.65 percent)
USD/CAD: 1.1108 (+0.38 percent)
USD/CHF: 0.8970 (+0.36 percent)
USD/SEK: 6.6221 (-0.24 percent)
AUD/USD: 0.8752 (+0.64 percent)

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