Forex – Dollar Treading Water Ahead of Fed; Brexit Extension Hopes Lift Pound

0 – The U.S. dollar was trading near its highest levels in two weeks against the yen on Monday ahead of a keenly anticipated Federal Reserve meeting later in the week, while hopes for a Brexit extension boosted the British pound.

The dollar was up 0.1% to 108.74 against the yen by 04:17 GMT (08:17 GMT), not far highs of 108.94, which is the strongest since Aug. 1.

The Fed is expected to deliver its third rate cut in as many meetings on Wednesday, and that has been priced in, but some analysts expect the Fed to sound “hawkish” by signaling it is reluctant to cut rates further.

Investors were also looking ahead to a Bank of Japan policy meeting on Thursday. The BoJ is leaning toward keeping policy on hold, but the decision is a close call as policymakers struggle with threats to the global outlook from the U.S.-China trade war and Brexit.

“A Fed rate cut is already factored in, but the dollar could be bought back if the Fed somehow signals it won’t cut rates further,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“Until we can confirm this, traders are likely to adjust their existing positions in the dollar.”

The U.S. dollar index, a gauge of the greenback against a basket of six major currencies was at 97.51, hovering below one-week highs.

The euro pushed higher against the dollar, rising 0.14% to 1.1092.

Sterling was also higher against the greenback, rising 0.23% to 1.2848 and was little changed against the euro at 0.8632.

Demand for the pound was underpinned with an agreement expected later on Monday to delay Britain’s divorce from the European Union to Jan. 31 after Prime Minister Boris Johnson failed to win approval for his Brexit timetable.

More than three years after Britain voted in a referendum to leave the EU, the country and its parliament remain divided over how, when and even whether to leave, and the matter has triggered a spiraling political crisis in the U.K.

–Reuters contributed to this report

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