U.S. Dollar Advances Amid Fed Rate Hike Expectations, Fresh Crude Oil Supply Concerns

(RTTNews) - The U.S. Dollar value edged higher on Monday as investors anticipate a possible rate hike by the U.S. Federal Reserve at the end of its two-day meeting which commences tomorrow. In addition, fresh concerns of supply disruptions in the Middle East that pushed crude oil prices higher, supported the U.S. dollar.

Today, the U.S. Dollar Index DXY, which measures the Greenback against a basket of other major currencies, was last seen trading at 99.48, up by 0.36 (or 0.36%).

While against the Euro, the USD was trading at 1.155, up by 0.42%, against the GBP, the USD was trading at 1.350, up by 0.17%.

Against the USD, the Japanese Yen was trading at 154.362, down by 0.58% and the Swiss Franc was trading at 0.817, down by 0.14%.

Against the USD, the Canadian Dollar was trading at 1.390, down by 0.23%. Data released by Statistics Canada today revealed that the headline inflation rate in Canada was unchanged from the previous month at 3.00% in August, in line with market expectations.

On a month-on-month basis, the Consumer Price Index fell 0.10% in August, following a 0.50% rise in July, against forecasts of a flat reading.

Meanwhile, core consumer prices increased 2.40% in August over the same month in the previous year. On a month-on-month basis, the core CPI decreased to 0.10% in August following a 0.20% rise in July.

Against one unit of Australian Dollar, the USD was trading at 0.714, up by 0.38%.

Attention of traders is focused on the highly anticipated interest rate decision by the U.S. Federal Reserve to be announced at the conclusion of its two-day meeting, which begins tomorrow.

Expectations are running high on a possible interest rate hike by the Fed to contain energy-driven inflationary pressures.

Last Friday's data from the U.S. showed that the Consumer Price Index increased 0.40% in August. On an annual basis, the CPI steadied at 3.40%, in line with forecasts.

While the core CPI increased by 0.30% in August, above market expectations of a 0.20% rise, on an annual basis, the core CPI eased to 2.40% from 2.50% of the previous month, matching market predictions.

Currently, according to the CME Group's FedWatch Tool, investors are betting on a 94.50% chance of a 25-basis-point interest rate-hike at the upcoming meeting of the U.S. Federal Reserve on September 15-16 while the odds on rates being held at the current level stand at 5.50%.

The rate hike bets hovered around 60.00% prior to the release of the Producer Price Index last week.

Later, the odds increased to 70.00% after data showed that the core producer prices (which excludes food and energy goods) for August increased 0.20% on a month-on-month basis, and inched up to 4.60% on an year-on-year basis.

A meeting between the high-level officials from the member nations of the Gulf Cooperation Council (without Bahrain) and Iran was slated to be held today in Salalah of Oman to discuss possible ways to end the U.S.-Iran conflict and push Iran to reopen the Strait of Hormuz at the earliest.

However, yesterday night, without specifying a new date, the officials announced postponement of the meeting.

Today, the spokesperson for Iran's Ministry of Foreign Affairs Esmaeil Baghaei stated that Saudi Arabia requested the postponement due to the events unfolding in Yemen.

Facing severe attacks by Iran-linked Houthi militant group of Yemen, Saudi Arabia's Ministry of Energy confirmed shutting down its 1,200 km long East-West Pipeline after multiple attacks.

The announcement triggered concerns of additional oil supply disruptions in the gulf.

U.S. President Donald Trump reasserted that the U.S.-Iran war would end by this year, most likely after the mid-term elections in the U.S. in November and observed that gasoline prices would "drop like a rock" after that.

Experts are of the view that until the elections are over, crude oil prices could stay higher.

Trump also announced that Russia and Ukraine agreed to stop attacking each other's energy installations, reviving hopes for a de-escalation in the war ongoing for more than four years. However, neither Russia nor Ukraine confirmed Trump's claims.