Dollar Eases Against Euro Ahead of Central-Bank Decisions

By Chelsey Dulaney 

The dollar fell against the euro on Wednesday, as investors focused on coming central-bank decisions.

The euro rose 0.3% to $1.0745. The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.1% to 91.02.

The European Central Bank will announce its latest policy decision on Thursday. Analysts at Credit Suisse say the central bank could deliver some fresh easing at the meeting but signal it is considering tapering easing operations in coming months.

"This type of mixed signal is not easy to decipher," analysts at Credit Suisse wrote in a research note. "A poorly-explained move towards tapering would pose a risk of a European 'taper tantrum' and a potent euro surge on the day."

Meanwhile, the Fed holds a policy meeting next week. Markets are pricing in a 95% chance that the Fed will raise interest rates at the meeting, according to CME Group data. Signs the central bank is taking a more hawkish view on future rate increases could boost the dollar and pressure emerging-market currencies, such as the Chinese yuan.

Data released on Wednesday showed China's foreign-exchange reserves fell faster-than-expected in November, as the Chinese central bank stepped up efforts to defend the sliding yuan. The dollar was recently up 0.2% against the yuan in offshore trading.

Higher U.S. interest rates pressure emerging-market nations by making their assets less attractive to yield-seeking investors and by making their debt more expensive to pay back.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

December 07, 2016 10:51 ET (15:51 GMT)

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