Investing.com - The dollar rose against a basket of the other major currencies on Tuesday ahead of an expected interest rate hike by the Federal Reserve, while sterling fell to two-month lows as markets braced for Britain trigger its exit from the European Union.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.2% to 101.46 by 08.32 GMT, building on the previous sessions modest gains.
Investors were awaiting the outcome of the Fed’s two-day policy meeting on Wednesday, with a rate hike almost fully priced in by markets.
Futures traders are pricing in around a 93% chance of a hike, according to Investing.com’s Fed Rate Monitor Tool.
With a rate hike seen as a near certainty investors were awaiting fresh cues from the Fed on the expected pace of rate hikes this year.
The dollar pushed higher against the yen, with USD/JPY adding 0.13% to trade at 115.02, not far from Friday’s seven-week highs of 115.49.
The euro dipped, with EUR/USD edging down to 1.0643, pulling further away from the one-month highs hit in the previous session.
The single currency gave up gains following dovish sounding remarks by European Central Bank officials
The euro had touched one month highs following reports that some ECB policymakers had suggested raising rates before the end of its stimulus program at last week’s policy meeting.
Sterling hit two-month lows against the dollar, with GBP/USD sinking 0.71% to 1.2130.
The drop in the pound came after parliament gave its approval to Prime Minister Theresa May’s Brexit bill, giving her the power to formally trigger article 50 of the Lisbon Treaty to launch divorce proceedings with the EU.
Sterling was also hit by Scotland’s push for a new independence referendum, which deepened political uncertainty.
The pound was also lower against the euro, with EUR/GBP advancing 0.64% to 0.8773, not far from Monday’s eight-week highs of 0.8786.