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LONDON – November 28, 2018: The dollar rose on Wednesday before a speech by the Federal Reserve Chairman that could provide an overview of the Central Bank's plans for monetary tightening and its reaction to recent criticism by US President Donald Trump .
The dollar has been under pressure in recent weeks following signs that the Fed could slow the pace of rate hikes due to slowing global growth, corporate earnings peaks and escalating inflation. trade tensions.
Reducing rate hikes could weaken the dollar, the world's most liquid currency, which has risen 10% since January.
"The fact that the Fed seems preoccupied by the current economic slowdown will be seen as an indication of how quickly a rate pause could occur," said Thu Lan Nguye, foreign exchange strategist at Commerzbank in Frankfurt. "I would be ready to face increased volatility in US dollar exchange rates."
Investors will also be interested in whether Fed Chairman Jerome Powell will respond to growing hostility from Trump, who said in an interview on Tuesday that he was "not a bit satisfied" with Powell and the Fed's policies are hurting the economy.
Analysts believe that it is unlikely that any political interference will alter the Fed's approach.
"The Fed appreciates its independence and its approach is very mathematical and systematic. In no way do we expect Trump to put pressure on the US central bank, "said Stephen Innes, head of trading operations at APAC at Oanda.
The dollar index .DXY, an indicator of its value against six other major currencies, rose 0.2% to settle at 97.51, its highest level since November 13th. The currency has risen for three consecutive sessions and is just below the peak of 97.69 this year. .
The strong dollar also reflected the risks surrounding the G20 summit in Buenos Aires from November 30 to December 30. 1. Trump and his Chinese counterpart, Xi Jinping, should discuss controversial trade issues.
Trump said this week that it was "very unlikely" that he would accept China's request to delay an expected tariff increase. This led investors to adopt safe haven currencies such as the dollar and the yen.
Yen Wednesday JPY = D3 hit its two-week low of 113.85 on Wednesday.
The euro EUR = EBS fell 0.2% against the dollar to settle at 1.1257 USD. It lost 1.5% of its value in recent sessions on signs of the weakening of the euro zone economy and on tensions between the European Union and Italy concerning the Rome budget.
Sterling GBP = D3 weakened to $ 1.2733. Traders are betting that British Prime Minister Theresa May will fail to secure her agreement on Brexit through a ripped parliament.
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