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Singapore - A gauge of the dollar held a gain from Wednesday as bets increased the Federal Reserve will raise interest rates this year, while speculation grew the European Central Bank (ECB) will signal the potential for easing when policy makers meet on Thursday.
The Bloomberg Dollar Spot Index halted a three-day drop in New York as oil surged above $44, reviving prospects for inflation to pick up. Futures traders are pricing in a 62% chance the Fed will boost rates by year-end, compared with 50% odds at the end of last week.
No move is expected at the April 27 meeting, the contracts show. Even though economists aren’t forecasting any change to ECB’s policy stance this week, 60% of analysts in a separate survey predict more stimulus may come as soon as September.
"Lately we’ve seen an improvement in the appetite for risk and leading indicators globally have also turned up a little bit, so will the Fed next week be a little more constructive?” said Elias Haddad, a currency strategist at Commonwealth Bank of Australia in Sydney.
“If so, that could lead to upward adjustments to US interest rate expectations and potentially provide the catalyst for a broad-based up-leg in the US dollar.”
Bloomberg’s dollar gauge, which tracks the currency against 10 major peers, was little changed as of 7:58 from Wednesday, when it climbed 0.4%, the most in a week. The measure touched a 10-month low on April 19.
The dollar was unchanged at $1.1297 per euro from Wednesday, when it climbed 0.5%. It bought ¥109.67 from ¥109.84. The US currency has weakened against all its G10 peers except the British pound this year as Fed chair Janet Yellen said the central bank would take a gradual approach to raising rates.
Economists in a Bloomberg survey predict ECB President Mario Draghi will hold the benchmark rate at zero, and the deposit rate at minus 0.4%. Both rates were cut at the last meeting in March and bond purchases were increased by a third to $90.4bn a month.
