LONDON, July 25 — The dollar held firm in early trading today as traders sought safer assets and braced for a sharp US interest rate hike later this week.
The US Federal Reserve has signalled a 75 basis point rate hike at its July 26-27 meeting, although data last week showing inflation hit 9.1 per cent year-on-year in June raised the possibility of a larger 100 bps hike later this year. “Recession fears should continue to prevent a solid recovery in risk sentiment, which should incidentally give some extra support to safe-havens and may keep the path uneven for high-beta commodity currencies,” wrote ING FX analysts in a note to clients.
“We think 1.0200 could prove to be an anchor for EUR/USD for the remainder of the summer, but re-testing parity is a tangible risk in the current high-volatility environment,” ING said.